Holding assets personally or in an LLC

[Charlie Rushton]

My brother and I are embarking upon a RE business, initially fix n flips to grow the cash base, with the view to buy and hold down the line.

He is based in the UK and will be supplying the capital(his) to finance the purchase and rehab of the target properties. I will be the guy on the ground.

We have a strong bond and mutual trust for each other, so any vicarious behaviour is not an issue. However, after the initial deal or two, the question arises as to which route to go down, i.e whether to incorporate as an LLC,(or other entity) and if so as a C corp or S corp. We are in this 50/50 per se, and as the business evolves, it is agreed that I would begin to make a salary.

From a tax strategy point of view what would be the best set up going forward

Until we get into buy and hold, asset protection is not as necessary IMO. Is this correct?

Any thoughts and advice are appreciated

Thanks for reading

[Luka Milicevic]

I don't know if there is a right or wrong answer. 

If you are getting loans, some lenders will not allow you to close in an LLC. A portfolio lender probably will allow you to close in an LLC.

In terms of liability, generally speaking, an LLC is better. I'm about to close on a new construction in my personal name along with a partner. We have a written agreement in place and no LLC. Reason being is tax purposes. The LLC is unfavorable.

With your partner on the deal being in the UK I imagine the tax implications are going to be complicated. (Putting it lightly). 

There is a podcast on BP that deals with asset protection that I just listed to. It's either BP podcast 110 or 111. I strongly recommend listening to that podcast. 

Forming an LLC is very easy and not expensive, but since your partner is a foreign person, it might complicate things. Again, it all depends and I don't think there is a right or wrong answer as it all depends on the individual.

None of this is legal or tax advice. Consult with your lawyer and or tax accountant for clarification.