LLC in Rhode Island?

Question

Hi all!

I've been researching the pros and cons of having an LLC for my future properties and reaching out to ask if any other local investors think it's worth it if you only have a few properties?  I'm looking to buy a few small multi-families in RI and not sure the cost to start and maintain an LLC outweighs the benefits of having one.  I'm actively looking for properties, but my understanding is that the LLC would need to be set up prior to getting a mortgage so trying to do some research in advance of having the property.  I plan to meet with an attorney to fully understand the details and implications but wanted to start with our local BP community of RI investors for any opinions, advice, knowledge that you might have to share.  Thanks in advance!

Anthony Thompson · Answer

@Nancy DeSocio as @KEVIN FLYNN said, you should definitely meet with an attorney.

A big reason for that is that a big part of the "right" answer for you depends on your personal situation (income, expenses, assets & liabilities).

I would also say, be sure to keep the "complexity" factor in mind, and ask the attorney (if s/he recommends an LLC now), what will you need to do as far as present (now) and ongoing state AND tax requirements to form the entity properly and maintain it going forward.

A good attorney will describe those items and also gauge your ability to handle such complexity, when recommending a course of action for you.

For example, if you don't have any assets presently besides maybe your car, it "may" be that for your first property, an LLC could be considered optional because it's your only asset anyway. But definitely consult an attorney for your particular situation!

(I only mention this because I sometimes see newer investors focus on more on asset protection than acquiring assets, when I think the focus should often be on acquiring the first asset and then worrying about protecting it.)

KEVIN FLYNN · Answer

meeting with an attorney is the best way to figure out what works for you, so many variables.

Look into umbrella insurance as well.

Good luck!

Scott Smith · Answer

You could form up an LLC cheap out of state (Texas for $300 or other states for under $100 in filing fees) and then own the property in RI in a land trust (with the Trust being in turn owned by the LLC). Since the Trust would own the property in RI it would not be subject to the yearly fees that are due by the LLC. Similarly, if you chose a Texas LLC, there are no yearly franchise taxes or fees.

@Anthony Thompson

@Nancy DeSocio

@KEVIN FLYNN

Nancy DeSocio · Answer

Thanks @Colleen F.!  I def will talk to a lawyer, but the info you provided is very helpful, as I was trying to find out about how much it would cost to maintain an LLC (with the understanding that there are more implications than just the $500 annual tax filing).  Appreciate the link to the sos site!

Nancy DeSocio · Answer

@KEVIN FLYNN, @Anthony Thompson,

Thanks so much for your thoughts...it's certainly appreciated!  Just in the last few hours, I've started to learn some of the complexities, especially since it would require a commercial loan rather than a residential loan...hadn't even thought of that.  I still plan to meet with an attorney for the reasons you both noted.  In the meantime, I agree that getting the property is first and foremost!  Thanks again!

LLC in Rhode Island?

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