Business Name???

Question

As an investor, is it a "must have" to have a business name?

Aaron Mazzrillo · Answer

So many new investors get all hung up picking a business, setting up a website, creating a business plan, getting a fax number, email addresses, blah, blah, blah.

Focus your energy on getting a deal done and stop wasting time on minutia. That's like learning all about asset protection when you don't have any assets to protect.

Ned Carey · Answer

Steve Wilson let me try to simplify this and bring it back to your original question.

Simplest answer - No

Clarify
If you are going to buy properties in you own name and operate as what is know as a "Sole Proprietor"  there is no legal requirement to have a company name.

There is no tax advantage to having a company name. There is no liability advantage to having a company name. There may be a very tiny advantage to how you are perceived by other people. Agents, tenants, may perceive you a little more professional if yo use a name but it would be insignificant.

Now back to the complex  :-)
Now a more significant question is "Should I do business as a separate entity?" In other works should you do business as a corporation, LLC, limited partnership etc. This can give you tax advantages (or tax disadvantages if you structure it wrong) and some liability protection.  However there are a lot of issues to consider; are you going to won properties of flip properties? What is your tolerance to risk? How liberal are the courts in your state? Is your sate anti investor or anti- landlord? Do you currently have significant assets to protect.?

As Bill Gulley points out you can run a business for years in your own name and have no problems.

My #1 suggestions is keep moving forward in your real estate investing. At the same time study and read about the law and taxes and how it will affect you.  I am not suggesting you need to do it your self but you should know enough to intelligently work with your chosen professional. 
Good luck - Ned

Bill Gulley · Answer

Well, I just don't understand how I did deals for about 25 years as an individual without any problems, leased properties, fix and flipped, did pass through deals (wholesaling) options, contracts for deeds and yes, you have probelms with some people, but nothing ever went to court.

I guess it's because I didn't screw a seller or buyer or a tenant, maybe that had something to do with it. Maybe it was acting legally and not pulling anything that people didn't understand. I didn't pull any guru crap.

If you do things honestly, disclose what you know, use good contracts that your attorney has blessed, use a good title company and get insurance, you have little to be concerned with in flipping a title from one person to another a few times.

You know, there was real estate before LLCs. Much of the LLC stuff is about attorneys and gurus selling hype, IMO. But, now that they do exist, it facilitates other benefits in taxes and operations that can't be done as an individual, so it's not all about liability, for that, it's cheaper to be insured very well. :)

Account Closed · Answer

In IL it isn't $900 for a LLC.  The cost of a LLC filed in person or via mail is $500. If online there is a $100 "expedite" fee. To file a Series LLC in IL it is $750 with $100 expedite fee if filed online.

I would NEVER get into a property in my personal name. No gamble is worth that. If a worker gets hurt, if someone slips, etc. All of your personal life and assets are open to lawsuits. NOT WORTH IT!

This is a business, there are start up costs that you need to have in place before you open the doors for business.

Bill Gulley · Answer

If you have the business name, you can use that even if it is not completely form, but it needs to have the registration filed. :)

Steve Wilson · Answer

Overwhelming information guys. I will do whatever I have to do to protect myself.
All of you have given me an idea and I thank you for that. Awesome site...

Steve

Mike Neubauer · Answer

Check to see what it costs to start an LLC in your state. I do business in Illinois and Indiana so I have an LLC in both. In IL it is $900 to start an LLC, so I could see where it may make sense to get a deal first. In IN it costs me $85. To me, $85 is well worth the liability security. All real estate investing leaves you open to potential suits. The problem with getting a deal or 2 is that if one day you hit it big, and made a mistake in that first deal or 2, you can lost it all down the road. You would have to check your state laws, but in most states, a plaintiff has 7 years to bring a suit forward from the date of sale of real property. I wouldn't risk all that for $85. Now, if it was $900, and I didn't have $900, I may have to take the gamble.

Also, don't be fooled to think you are "just" wholesaling. There is risk there too. You may get a property under contract and wholesale it off. Then, the seller talks to some people and he feels he got ripped off, so he sues you. Even though you use proper contracts, etc you are still open to suit. And, it will probably costs you way more to fight the suit than is worth to just settle.

Steve Wilson · Answer

Gary Clark I'm into wholesaling and will rehab a few as well.
Gerald David just asked an interesting question.  Is it wise to just get a deal or two first before creating a business name? (Source of like getting my feet wet first)...

Gerald David · Answer

Would setting up a biz entity matter if you're a beginner?  Wouldn't it be better to just get a deal or two under one's belt before the creation of your biz entity?  At least if you're wholesaling?

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