When to establish a LLC

[Brandon Purdeu]

I'm searching diligently for my first flip property. My agent and I are going out this afternoon for the 3rd time, just being patient and I want my first one to have a little extra padding for mistakes which I'm sure will occur. At what point in time do you recommend establishing a LLC? The pro's are obvious by protecting my personal assets and liability. Should I setup the LLC now and do my first deal under the LLC or just play out the first one to test the waters? Thanks for any tips! Brandon

[James Wheeler]

Depends on you mostly. I cannot offer any legal, tax or insurance advice because I am not a lawyer, CPA or Insurance professional... I can tell you my thoughts - for whatever they are worth.

Set up your LLC now. It helps you build credibility with other professionals (you know HML, Contractors Etc.)

In AZ I learned from my CPA that from the founding of my LLC I can write off my entire cell phone and internet bills at home as they are essential in my home based business of real estate investing, without the LLC I was only allowed to write off the percentage portion based on the square footage designation I gave to my home office space, that is 10% in my case, which I still can use to write off part of my electric and mortgage payments since it is still used as home office.

You can start building your brand now, rather than waiting and hoping that no one takes your company name/idea... And, if you have an LLC with more than 1 person in it (yeah, they can pierce the corporate veil more easily if you are a sole member LLC or if it is just you and your wife...) you become more protected personally when you finally are getting deals going without having to play "catch up" or creating an entity for the "sole purpose of asset protection" (something my lawyer said to me...).

Hope that helps! (oh, and LLC formation fees are tax deductable also!)

~ James