Wholesaling legal prep

[Justin Foster]

1) Am I at risk if I try to wholesale without an LLC?

I read a post from @Ned Carey in this thread that mentioned an LLC is less important if you have less assets to protect. What about as protection from a lawsuit? How often do wholesalers get sued?

2) Do I need to have an official business, or do I wholesale under my own name?

I'm wondering how my wholesale profits get taxed if they're going directly to me instead of a business. Additionally, how does it look to investors if they make the payment out to an individual instead of an official business?

[Ned Carey]

@Justin Foster I don't believe wholesalers get sued very often. I suspect most law suits would be for contractual issues like breach of contract.

Many people operate businesses as "Sole Proprietors." In other words you and your business are the same both legally and for tax purposes. You can register a "doing business as" (DBA) if you want to use a company name. The income is taxed as ordinary income and you can deduct expenses related to your business. Some people mistakenly think they need a corp or LLC to deduct expenses but that is not true.

I recommend the Nolo Press website and their books on LLCs and corporations. They will help you understand the issues so you can talk more intelligently with your professional like a CPA or Attorney. It is important to understand the attorney is there to protect you legally and the accountant is there to save you taxes. They may give you conflicting information becuase they have different goals. Do not do as many do and ask your accountant for legal advice or your attorney for tax advice.

Good luck - Ned