LLC and Entity Formation

[Mark Welp]

Hello,

I am not a lawyer, but I am curious on what people are doing. I have two single member LLC's which hold rental properties owned by me (I like to keep a 3 or 4 properties in each LLC).

However, for marketing purposes and general costs, I would like to create some sort of entity just to market my investment company (for example "Mark Welp Landholdings".)  This entity would not have any rental properties in it; really just for marketing and some general costs.  What is the best way to do this?  Just set up a separate entity?

I will ask my attorney as well.  Thanks!

[Frank Chin]

Steve, Mark is just using it for marketing purposes, like making up banners etc.

I had the same situation. I had a software consulting, IT business, established the business reflecting that. via an S Corp. Then my wife started a business marketing nutritional supplements,, and we decided to do it under the same corporate umbrella as well, using my S Corp. The problem was,, when clients issues checks to for her products, nutritional supplements, it's written to an IT company. So the DBA and a separate bank account solved the problem.

While my business income at the time was steady, hers was quite sporadic, and we don't know how good or steady it will be. We had CPA's doing my taxes, and another entity would involve another set of books, separate Federal, State, Local, sales tax returns separate sales tax exemption certificates.

Mark has a less compelling problem. I can't see him doing all that extra work, extra tax returns, for another entity if all he wanted is a snazzy name for marketing to put on banners. If he wants to separate his costs, sales and expenses on his DBA can be assigned a separate class if he uses Quickbboks.

[Frank Chin]

For what you are planning to do, a simple DBA (Doing Business As). You just pay a one time fee, no annual fees, no separate tax returns. You can use it for marketing, banking purposes etc.

[Steven Hamilton II]

In OH LLCs are cheap. They can be a good strategy for asset protection; however, a DBA can be used. I recommend insuring well no matter what. You can do that as a sole prop since you are not holding assets. My biggest concern would be personal liability.

[Mark Welp]

Thanks @Frank Chin

[Mark Welp]

Thanks @Steven Hamilton II

[Frank Chin]

Steve, Mark is just using it for marketing purposes, like making up banners etc.

I had the same situation. I had a software consulting, IT business, established the business reflecting that. via an S Corp. Then my wife started a business marketing nutritional supplements,, and we decided to do it under the same corporate umbrella as well, using my S Corp. The problem was,, when clients issues checks to for her products, nutritional supplements, it's written to an IT company. So the DBA and a separate bank account solved the problem.

While my business income at the time was steady, hers was quite sporadic, and we don't know how good or steady it will be. We had CPA's doing my taxes, and another entity would involve another set of books, separate Federal, State, Local, sales tax returns separate sales tax exemption certificates.

Mark has a less compelling problem. I can't see him doing all that extra work, extra tax returns, for another entity if all he wanted is a snazzy name for marketing to put on banners. If he wants to separate his costs, sales and expenses on his DBA can be assigned a separate class if he uses Quickbboks.

[Steven Hamilton II]

The issue is those expenses are related to the other activity and would need to be allocated to those activities.

[Cody L.]

I have my management company in its own LLC. It doesn't own anything. So if a tenant wants to sue, have a blast.

But that LLC is the "face" of all the properties. They pay rent to the management LLC, not the company that happened to own the building.

Each property is in its own LLC.

[Frank Chin]

Originally posted by @Steven Hamilton II:

The issue is those expenses are related to the other activity and would need to be allocated to those activities.

 In Quickbooks, I assign a class to each each income item and expense item. Allocation is done by class. So I can have a separate P&L for each activity, like major companies can have divisions with it's own P&L. 

[Lakshay G.]

@Cody L. I am just securing my first deal. It's not "cheap" in Maryland to form and maintain LLC as compared to other states. Should I create 2 LLC in your opinion? I was just thinking of opening one. Another issue is lender, he won't give loan to LLC. The property has to be on my name for him to give me the loan.

[Tyler Sterns]

If you have an LLC in another state you will have to register it as a foreign entity in Maryland in order to be able to lawfully transact business there. Most lenders will loan to an LLC as long as you personally guarantee the note.

[Matt Horwitz]

@Mark Welp, I would just form another LLC in this case. No need for an existing LLCs to own this new one (at least from what I can tell). Ohio is a great state for LLCs. $99 to form, can use a PO Box for Registered Agent (a very unique quirk to OH), and no Annual Reports! Can't beat that. I'd be curious to hear what your attorney recommends as well.

[Cody L.]

Originally posted by @Lakshay G.:

@Cody L. I am just securing my first deal. It's not "cheap" in Maryland to form and maintain LLC as compared to other states. Should I create 2 LLC in your opinion? I was just thinking of opening one. Another issue is lender, he won't give loan to LLC. The property has to be on my name for him to give me the loan.

If you can't get a loan under an LLC I assume this is 1-4 family. And if that's the case it's a moot point. Don't get an LLC unless you want to pay cash.

Not sure your question here?

[Lakshay G.]

@cody

Thank you.