LLC or business name?

Question

Does anyone have any thoughts on functioning under a business name or LLC versus your personal name when moving about the Real Estate world?

Brian Burke · Answer

@Melissa Hasan , just outside of Tucson AZ there is a boneyard of thousands of old military airplanes that are no longer used.  They just sit there collecting dust, waiting for their turn for the scrapyard or to have parts taken from them, or perhaps the distant chance that one day all hell breaks loose and we need thousands more military planes to defend ourselves.

Such is the same with LLCs for new real estate investors. Everyone that wants to try their hand at real estate investing is anxious to run out and create an LLC so they can get started..  Search the forums--it's one of the most commonly asked questions.

Somewhere out there (maybe it's in Tucson too?) there must be a boneyard for all of these scrapped LLCs. A high percentage of budding real estate investors don't make it.  Why?  Perhaps because they are focusing on the wrong things like entity structure when they should be focusing 100% of their energy and dollars on acquisition.

So what am I saying?  Forget about LLCs, go out and get deals done before you worry about that stuff. You can run your business in your own name for free.  If you would rather be "ABC Homebuyers" than "Melissa Hasan" you can file a fictitious business name with your county clerk for less than a hundred bucks.  You still take title to the real estate (and borrow money) in your personal name but your business cards, letters, etc can all have the business name.  No LLC required.  Better yet, you don't have to pay hundreds to thousands of dollars for an unnecessary LLC and you won't take up more space in the graveyard of abandoned real estate LLCs if you decide that the lifestyle of the real estate entrepreneur isn't for you.  Save the LLCs for when you hit the big time.

Jim Keller · Answer

Hasan family

I recommend you work on finding good deals to close on or wholesale.  The first few I did were in my own name, I really didn't have any assets to protect myself from loosing.  Since those days I have consulted an accountant in my state "California" and got advise on what worked best for my family.

Just find deals.... you can never go wrong collecting contracts.  I have 12 open deals waiting to be bank approved "short sales" or escrow waiting to be closed right now.  Focus on the deals.

For under $2,000 you will get a your llc, s-corp, or family trust questions answered by your tax advisor let them worry about it.  The secret is the deals will easily pay for his/hers opinion.  BEST OF LUCK

Jim

Rick H. · Answer

I waited for 20+ years for the owner of one of my entities to abandone the corporate name so that I could snag it.

Is it important? Maybe not. In a lawsuit, one if my own attorneys said he thought the name had negative connotations. Who would gave thought "DeadPeopleDeals, Inc" was stigmatic? (Just kidding...that is NOT the name).

Anyway, I agree that it's much more important to do deals than be concerned about protecting assets you ain't got!

We typically use a sub-S corporation as trustee of a title holding trust for each asset. Simple and avoids double taxation. Not to get into a tax discussion, tho.

Go do deals. Re-post about this when your investment net worth exceeds $100K.

Brie Schmidt · Answer

@Melissa Hasan - It depends on your funding.  Residential loans can only be made to a person and commercial loans can only be made to a entity.  If I have a choice, all mine would be residential for the longer terms and better rates.  But residential loans have limits

Linda Collins · Answer

Brian thanks so much for the quick response to what I'm sure was a silly question.😊 It's great to have helpful and knowledgable people out there to help!

Brian Burke · Answer

@Linda Collins your local municipality will likely require that you get a business license, but filing the fictitious name is all you need to start using the name.  The business license doesn't grant nor deny you the right to use the name, it's a separate issue.  The business license is really just a way for your city to collect money from you.

Linda Collins · Answer

When getting a Fictitious Name does that also mean getting a business license? Or can you just get a Fictitious Name?

Mia Brewington · Answer

I had the same question about this! Thanks for everyone's insight! Extremely helpful

Michael Moikeha · Answer

I set up an LLC for $100. My state is small business friendly. I did it for 2 reasons. One, it looks good when talking to people and it does add a sense of professionalism. Two, if you are partnering with someone it makes for easy asset division.

That is the main reason that I created my LLC. We started working together and when we found a deal, we created the LLC and structured it so that when the money comes in, it stays in the company which we are both 50% owners of.

This worked for our needs.

Troy Fisher · Answer

While I agree with what all the other posters suggested, Focus on Working Real Estate rather than focusing on Entity Structures... I am finding the fact  that I have an operating LLC with tax history it is going to be easier to gain traction as I accelerate my real estate.

A lot of my tax issues have to do with not having the correct structure in place, but I work with a partner and have other considerations to deal with.  We did it bass-ackwards and are going to have to pay a little "education" tax.  But if all pans out paying that growing pains through taxes may allow me to accelerate my financing structure a little quicker.

But like everyone else said, I feel needs to be said again and again... deals first... entities second.

LLC or business name?

Most Popular Reply