Should i Start an LLC for note investing in real estate flips?

Question

I have just started Note Investing with a local house flipper/Investor and i plan to continue doing so. My question is should i create my own LLC for this, and how complicated does it make it to pay my self from the LLC especially if i want to take out all the cash i originally invested out of the LLC?

Or would it be easier to continue doing it without one.

Thanks in Advance

Or would it be easier to continue doing it without one.

Thanks in Advance

Nate Sanow · Answer

Yes.definitely get one.

Richard Bechtol · Answer

I think an LLC would be a good idea. It minimizes your liability. For the payment of yourself, I would speak with a CPA but by default an LLC is taxed as a disregarded entity but a CPA may advise you to form an S-Corp.

Chris Seveney · Answer

@Joshua Brito

If you are doing note investing (this is what we do), you will want an entity

The entity type should be discussed with your attorney and cpa as with a LLC you cannot take a salary you take distributions but need profit to take it but with an s Corp for example you can take a salary

William Harvey · Answer

I would create a LLC. I'm not an attorney and this certainly isn't legal advice, but if not for anything else, it is much "cleaner" to have a separate entity and bank account that you are doing business from.

It isn't complicated to pay yourself at all. I'd look into whether it makes sense to treat it as a partnership or S-corp for tax purposes and you'll get clarity on this. By default, I believe all LLC's are initially classified as partnerships, but you can elect to be classified as an S-corp by sending in a form to the IRS.

Also, if you have a separate bank account for the entity, this makes tracking income/expenses much easier too since it isn't blended with your personal account. I'd talk to a competent CPA and they can help you here with how to be treated for tax purposes. Hope this helps!

Should i Start an LLC for note investing in real estate flips?

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