LLC vs Personal Name

[Tom Bud]

Hey all,

I wanted to get everybodys opinion on my situation. I want to take the hardest step in the real estate investor world; BUY MY FIRST PROPERTY.

I wanted to ask is there any benefits of completing a flip under an LLC vs my personal name in terms of tax? I don't want to spend 50% of my profit in capital gains tax, although I don't think there are any ways around it without a 1031 exchange. I want to take my profit and pay for my whole college tuition.

Thanks,

Tom B.

[Steve Perkins]

As @Jeremy Tillotson says, the LLC is not likely going to give you any kind of tax break. I'm not a corporate entities lawyer or an accountant, but my understanding is that taxes for LLCs are pass-through (i.e., profits and losses "pass through" and are reported on the owners' 1040).

The LLC exists to insulate you from liability in the event there is a claim against you or your business arising from the property. Short answer is that theoretically, your personal assets are separate from the LLC's assets and cannot be used to satisfy a judgment against the company. In other words, you only risk the company's assets. I say "theoretical" because there ARE things you can do (without knowing you're doing them) that will legally allow the court to disregard your corporate status and go after personal assets. So, if you're going the orporate entity route, DO talk to lawyers and accountants to make sure you set up a process that avoids these pitfalls.

Good luck!