LLC on the first property???

Question

Hi all, this is my first post here on this forum after the intro in the new member area!

Here is the situation, my fiancee and I are thinking of purchasing a duplex to maybe a fourplex for us to live in and rent out the other suits to pay off the mortgage faster.

I have read a thread that recommended the investor to set up an LLC or some kind of coporate entity in case of legal problems.  My question is, as a investor buying my first property, is it worth while to setup a coporation right off the bat which will hardly be making any money (after mortgage payments, expenses etc.) or will it be wiser to wait until I have a couple properties and more steady cash flow first?  Will I have to pay taxes on the property if I transfered it from being my personal property to the coporate property?

I am in Canada, but I don't imagine things are drastically different else where.

Thank you all for your advice!
WiLL

Account Closed · Answer

Lets flip this around. If you are a doctor then the liability might come from being a doctor so assets that are owned in an LLC or other form can be protected. Granted a doctor who is sued can lose their interest in the LLC.

Get the book Wealth Protection by Bronchick to get a better sense. Think of it as a primer so you know what you are asking when talking with an attorney.

The book is US centric and the Canadian system will clearly be different. Not even sure that LLCs exist in Canada. LLCs vary by state in the US.

The book is inexpensive, a quick read and helpful for the concepts if nothing else. On Amazon it is less than $14 USD.

Asset protection is also tied into estate planning.

John Corey

Account Closed · Answer

It is less about being rejected as much as it has to do with being a foreign entity. A foreign entity is any LLC or corporation that is not registered with the state where it is doing business.

Take CA for example. The annual filing fee for an LLC when I last looked was $800. If you have a DE LLC the fee to register with CA as a foreign entity is the same $800. In this case you are paying DE and CA while not really obtaining much in the way of added benefits.

Each situation needs to be checked. Some of the advantages of registering in a specific state fade away when you look at the costs or the real merits. In other situations the benefits are real but mostly going to benefit a large multi-national rather than a single member LLC.

John Corey

Account Closed · Answer

Warning:

A DE LLC will work a bit less well in states other than DE. By this I mean that your ability to operate in another state is compromised unless you register the LLC in that other state. Hence you could face fees that are equal or greater than just having the LLC set up in your home state.

John Corey

N/A N/A · Answer

I am taking all of your suggestions to heart! This website has become an endless source of great information and I am so happy I found it.

Thank you all for the input.

Account Closed · Answer

In the US if you pay $1,000 or less to have a lawyer set everything up you are getting a fair price. Fair to good if you are down at the lower end of the range ($200 or so).

Setting up the LLC is mostly filling in a form or two and filing the forms with the state. More important is learning how to run the business correctly so a judge does not set aside the LLC when you get sued. The LLC has to be set up correctly and then you have to follow the best practices if you want to claim that you are really running a company.

The lawyer who advised a person with a low liability profile to focus on just an LLC and an umbrella policy is offering good advice. Their fee is too high but that does not reflect on the quality of the advice.

The LLC can help when you hire a local kid to mow the lawn, when you ask a sub-contractor to pick up some materials using your vehicle and other situations. Stuff happens and you can later get sued.

To have a valid umbrella policy means you have to have your other insurance policies at the right levels. No insurance company offering umbrella insurance wants to be first in line for an auto claim or similar insurance claim.

As Mike suggests consider reading up on the topic. William Bronchick has a book called Wealth Protection. It sells for under $15.00 on Amazon. It is a great primer to read before speaking with a lawyer. It will tell you want to ask the lawyer and why you should have certain legal entities. The book covers a bit more than just RE. The book is not all that large and it is easy to understand what Bronchick is saying. He is a practicing attorney and RE investor.

John Corey

Bryan . · Answer

In many states you can set it up yourself through the state's website. You may be required to advertise the new entity based on state laws. I had my lawyer do it because he was doing other work for me and he charged me $200 which included the state's $125 fee! Do some research online with your state and I think you will find that it is relatively easy. Also, I wouldn't use that attorney for any other work! LOL
 :D

Susan Gozali · Answer

Hi Will,

I agree with what everyone said above. LLC is indeed a useful tool to protect yourself. Fortunately, you can form it online, there are few websites in Canada who offer the service, and you can choose from few different packages.

Good luck with everything.

-Susan-

Mark Gingrass · Answer

I set up an S-Corp for 50 bucks.

Michael Rossi · Answer

I certainly would NOT spend thousands of dollars to set up an LLC.  That is just plain ridiculous.  Were these people holding a gun?  I'm just wondering because certainly sounds like highway robbery!

There are many online companies that will set up your LLC for a few hundred dollars.  Better yet, you could buy a book or course and learn to do it yourself (including maintaining the LLC which is very important).  I bought Pat Tarr's course and have set up many LLCs and even a few land trusts myself.

Mike

N/A N/A · Answer

I am a newbie  and have learned a great deal by reading the valuable information in this forum.

Thanks for sharing your expeirence and views.

I am in Dallas and thinking in setting up an LLC before my first transaction. I recently checked a couple lawyer in the yellow pages and I got a bit confused.  One of the attorneys recommended me to set up a LLC , and an FLP and a C-corporation as a good asset protection tools.  However the cost of  setting was close to $14,000.  A second lawyer told me to set up an a LLC and to get an umbrella policy.  He did not think I was vulnerable enough.  The cost of seting it up about $4,000.  I am not sure if the fees are reasonable, but last week I received an email from a CPA offering to set up the LLC for half of the price.

Do I need to have a lawyer or a CPA to set it up.  Do asset protection specialists need to be lawyers?

I heared an one of the seminars I attented that in order for the LLC to be effective it needs to be set up propertly with all the right provisions.
.
Any thoughts from any of you experience investors will be greatly appreciated.

PS: Any body from Dallas that could recommend some one  have worked with.

Thanks a lot.