When is the right time to create an LLC?

[Stephanie Grady]

Hi Everyone!

My husband and I are just starting out in REI, and before we invest in our first buy and hold -- should we create an LLC? I'd appreciate any feedback!

Thank you in advance :) 

Stephanie

[Greg Scott]

Stephanie:

Most people that are starting out have no assets. (In other words, they are not attractive prey for a lawyer.) Despite this most feel they have to have an LLC in place to hide what assets they have.

In reality an LLC (in my non-lawyer opinion) is really the 3rd line of defense. Good management and good insurance are probably the first two.

On the other hand, you are not a low profile person.  You have a big target on your back.  I wouldn't hold assets in your name.   People will be looking for you.

If you are buying single family (small stuff) you can buy in your name but within a few weeks you may want to think about moving it to an LLC. Better yet, buy in your husband's name and then move it. If you are buying large properties (apartments / commercial) I would buy directly into the LLC with a commercial loan.

Good luck.