How do you apply for a "Flippable" LLC vs a Main LLC ?

Question

I'm new to Real Estate and Wholesaling and have a question about obtaining LLC's in the state of Georgia.

How do you obtain a "Main" LLC from the state that has an associated business bank account vs. a "Flippable" LLC used for double closing a  Wholesale deal?

Avery Kelly · Answer

@Jim S. - I will most likely check on all this with a real estate attorney to make sure I'm 100% confident and can ask further questions. Thanks for the advice.

Will Barnard · Answer

There is no difference between a "flippable LLC" and a "Main LLC". I suspect you are looking to wholesale legally (not brokering without a license) and want to know the process of forming the LLC which you name your buyer/partner as part owner, then transfer your ownership % to them at closing for your "wholesale fee". If that is the case, you don't need to double close the transaction, you simply have one closing saving costs which could apply towards your entity set up fees.

Simply form an entity with any entity preparation service provider (or do it yourself), have the operating agreement made up and you are ready to use it to "wholesale". Simply add the name of your buyer partner to the entity as you make the offer and vest the offer in the name of the new entity. During escrow, draft agreement that sells your shares/ownership % to the "partner" for your designed profit and at close of escrow, they own the entity 100% which holds the property title and you hold the cash for selling your portion.

Will Barnard · Answer

To reiterate, there is no such thing as a "flippable LLC" and "main LLC", but just as important, your process of how you intend to wholesale is key to stay on the legal side of the fence. So following my instructions above will help guide you on that legal path. No need to double close, no need for two escrow fees, no need to hide anything from the seller, no need for BS escape clauses in your contract, no need to follow the lead from the gurus who simply give out bad advice for huge fees.

Avery Kelly · Answer

@Will Barnard  and  @Barry Pekin, it sounds like the process by which I obtain what I'm calling a "flippable LLC" vs. a "Main LLC" is no difference. An LLC is an LLC - it's just how you use it. I was hoping the "flippable LLC" was cheaper somehow. I appreciate everyone's input - as this will help me with my understanding and verbage when speaking with a real estate attorney.

Avery Kelly · Answer

@ Lydia T. Thanks for sharing when this situation would be warranted. In addition, would this situation also apply if I was working with a realtor who already had a fixer upper under contract from a seller? The way I understand it - a realtor contract isn't assignable - so the "flippable LLC" would need to purchase the property and then sell the "flippable LLC" to the buyer to avoid a bank from forcing a 90 day wait period for the new owner to resell the property. The "Main LLC" would be for doing business for assignment fees (wholesale deals that are $10k or less) where I would have a permanent bank account for my ongoing business transactions.

Barry Pekin · Answer

@Avery Kelly,

It doesn't seem like it's necessary to do that.  @Lydia T. mentioned the situations where that might be helpful.

To answer your question, however, forming an LLC is quite easy.  You can search online for companies that help you do this, or you can go directly to the State Corporation Commission (that's what it is in Virginia, anyway) website for instructions.

I'm a big fan of formal company entities such as LLCs.  I actually have a few for different businesses.  But I don't recommend creating one just to hold a property that you plan on wholesaling, unless there's a specific need.

Avery Kelly · Answer

@Barry Pekin That's exactly what I'm referring to - purchasing the property in an LLC and then selling the LLC.

Lydia R. · Answer

@Barry Pekin The only instance I know of where this practice makes sense is when you are wholesaling an REO or a short sale and the deed restriction imposed by the bank prohibits wholesaling or re-selling the property for a predetermined period of time.

Barry Pekin · Answer

I'm assuming you're referring to the practice of purchasing a property in an LLC, and then selling the LLC.  Honestly, I'm not sure what the benefit of this is.

Lydia R. · Answer

@Avery Kelly I dont understand why you need a second LLC for double closings? Ive got 1 LLC for wholesaling and Ive double closed with no problem.  Can you explain why you want more than one LLC ?

How do you apply for a "Flippable" LLC vs a Main LLC ?

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