Attention flippers: Need liability advice, conflicting opinions

[Ryan Vienneau]

Looking for some advice from any flippers in New York.  I'm planning to do some flips this year for the first time in the Albany NY area, I'm in the process of forming the company right now, meeting with CPA's, lawyers, insurance agents, etc, but I'm getting conflicting recommendations from all of them regarding how to best limit my exposure to lawsuit.  Here's how the meetings have gone, in order of my interviews with them:

CPA#1: "There's no tax benefit to having an LLC, only the reduction in liability benefit, so it's up to you to figure that out with a lawyer and insurance agent, but most of our clients form LLC's for flips."  

CPA#2: "There's no tax advantage to having an LLC, and it would be far cheaper to get liability protection by buying insurance rather than dealing with the hassle and expense of having an LLC, so I'd just form a dba and get good insurance."  

Lawyer: "Whether you form an LLC or get sufficient insurance doesn't make a difference to your exposure level starting out if you don't have millions in net worth.  Eventually as you grow, it would probably be wise and more cost-effective to then form an LLC, but you should talk to a CPA and an insurance agent."

OK, so up until this point, I'm thinking no to the LLC, just get a good liability policy and form a dba and I'm good. Then I met with the insurance guy.

Insurance guy: "Umbrella insurance will NOT cover anything related to flipping properties, that's it's own business, so you would need a commercial liability policy, which in NY is stupidly expensive do to recent changes in laws and will run minimum $5k/yr, probably closer to $10k/yr, and that's if you're only doing a couple flips per year.  So, I'd love to sell you a commercial policy, but you're nuts to not form an LLC instead, it'll be cheaper and give you better protection."

So to all my fellow flippers in NY that are NOT operating as an LLC, what are you carrying for insurance and what is the cost?

To all those that ARE operating as an LLC, do you agree with the insurance agent's recommendation?

Thanks all!

[Mark Creason]

Until you have money and assets, you are judgment proof.  An attorney looking at suing you will pass because you would not have anything to attach to.

A properly used LLC will significantly reduce your risk. You have to be weary of commingling funds between your personal and your business accounts. I do think there are some tax advantages with creating an LLC as a holding company for multiple projects.

I live in Texas, which has a less litigious reputation.

Mark