Establishing legal entity

[Aaron W.]

Currently own three multifamily fourplexes (2 in Ohio, 1 in Missouri). Plan to continue to purchase more soon. Currently reside in Virginia.

Working on establishing a legal entity and spoke with one law/cpa firm. They recommended the following entities:

Create a WY LLC for your holding company. This will hold your safe assets, such as a savings account, mutual funds/stocks, precious metals, etc. This LLC is in WY for asset protection and privacy from outside liability. You can also use the WY LLC for a "friendly lien" against the equity in your rental properties.

Create a S-Corp for your real estate business in VA. This S-Corp will be used for management and tax reimbursement. This will allow you to take advance of 280A and 199A tax codes. Also you are able to reimburse for out of pocket expenses like medical expenses, home office expenses, property insurance.

Create 3 LLC(s) in 2 in OH and 1 in MO for liability protection from your passive rental investing.

They want to charge between $9K to $15K for these services to include some ongoing legal and accounting services.

Just want to get a second/third/fourth opinion

from the community in this plan and if there are better alternatives or more cost effective ways to get these same services.

Thanks all! Happy holidays!

[Costin I.]

Wow @Aaron W. - 9K to 15K for all this, huh?  You better make sure you have a lot of assets/equity/cashflow to protect for that kind of setup and ongoing maintenance hassle and cost.

Do you own them free and clear? The mortgage note itself is a form of asset protection.

Have you implemented and exhausted all the other risk mitigation procedures necessary and available to you?

Just because you create an LLC (which is a legal entity, with little bearing on taxation) it doesn't necessary mean you'll be able to cut your taxes. Home office expenses are deductible regardless you have an LLC or not. Same for rental property insurance. Taking advantage of 280A and 199A requires specific conditions (like contemporary documented number of hours in business), do you meet them?

How much will be the ongoing legal and accounting services charges, and how much of your cash flow percentage will eat?

You don’t want to own properties in a S- or C- corp. (Owning Rentals in an S Corporation Might Be a Costly Mistake https://www.biggerpockets.com/renewsblog/2016/02/25/owning-rentals-s-corporation/). And if you rely on losses from your rentals to deduct (are you aware how much in what conditions?) from your W2 income taxes you should reevaluate your investing plan.

Here, some diagrams to help you in your quest for answers:

asset-protection-onion-diagram-v2 asset-protection-decision-diagram

My 2¢, don't consider this legal advice - consult a specialist like @Scott Smith for that.