All Forum Posts by: George Skidis

As an income tax preparer, not declaring your income in another state is a dangerous option. The other issue is you cannot declare your losses when it suites you. If you receive income from an LLC in another state that income is taxable to you in your state of residence. On the other hand, an LLC in another state that does not do business in your state may be exempt. Your income is not.

An LLC can choose to be taxed as a sole proprietor (Disregarded entity on Schedule E), Partnership, S Corp or C-Corp.

Specifically, a domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless it files Form 8832 and affirmatively elects to be treated as a corporation. For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and elects to be treated as a corporation. However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity.

Once an LLC decides to be taxed as something other than a disregarded sole proprietorship it must file the proper tax return the very next tax year. Even if no income was earned. The penalty for late filing penalty is $220 per month per partner. Example: 6 months late with 4 partners = 220 x 4 x 6 = $5,280 and it goes up $880 per month until filed. This is true even if the LLC did not earn any money in those months.

A qualified income tax preparer like myself can get up to 12 months of penalties waived, One Time. They just have to swear to the IRS that you are an uniformed tax filer (idiot) that didn't know what the consequences were. First time I did this I got 12 out of 18 months waived. After spending $24,000 to attend the event they bought the $6,000 Wyoming LLC package at a Bigger Pockets seminar and left it on a shelf for almost 2 years. It took them that long to pay off their credit cards and even think about investing. That is why I think of them as Busted Pockets.

An LLC taxed as a partnership or S-Corporation issues a Form K-1 to each partner. The K-1 declares their profit or loss and percentage of ownership. Once California sees the K-1 on your personal tax return you will owe the LLC Fee.

The only tax entity that does not issue a K-1 is the C Corporation. Once you get paid and declare the income on your personal return, California will most likely check out the LLC in the state and go after you.

Avoid tax fraud. Move out of California if you don't like being taxed to death. Illinois isn't much better. Additionally, our legislature just gutted a huge percentage of LLC protections.

An LLC provides some asset protection. However, if you don't maintain all of the "Corporate Proprieties" it can be pierced by even the worst attorneys.

Always carry the MAXIMUM liability protection on each property and purchase both a personal and a commercial liability policy of $2 million or more. When buying umbrella policies don't forget to ask the agent what the "Retained Amount" is.

Check out my REIA below

In the state of Illinois it is ILLEGAL to wholesale (assign) more than one real estate contract per year unless you are a licensed real estate agent.

Anti Landlord laws are why the Illinois Rental Property Owners Association exists. The problem our state association and local chapters face is diminishing enrollment. Everything is somewhat free on the internet. Paying $200 annually to a local member association that pays the state association to fight bad laws is now too expensive. 

Don't get me wrong, Bigger Pockets and YouTube have their place, but a local association has in person meetings, Face to Face networking, Cash Flow game nights, hands on training, local vendor discounts and so much more. Plus, they help in the cause to fight anti landlord legislation. Plus a local association is more involved with local laws and legislation

In Southern Illinois join Illinois REIA, In Chicago look for the Chicago Creative Investors Association. Springfield Area Landlords Association or go to www.IRPOA.org and click on the member Association tab to find a group near year and join the fight against Anti Landlord Legislation.

In politics if you are not at the table, you will be on the menu. 

Join the legislative war and check out a local association near you.

Harrison:

You are not asking the right questions, and your description is not very informative.

Rehab is dependent on the type of original construction. Your description could be a ranch style "National Home". These were manufactured with by sections in their factory and assembled on location.  Most wall panels were 4 feet long so the length and width are most often divisible by 4, These were very popular in the 50s and 60s and most are on a slab foundation. If that is true, the second bathroom may not be affordable or practical.

Your project could also be something with a full basement built in the 40s. If so that would make it easier to add a ground floor bathroom. But then you need to consider how old are the drain lines in the house and in the ground. Does it still have a septic system or has the city installed sewers. Next are concerns about foundation issues.

The older the house the older the plumbing. Is it copper or galvanized?  Re-pluming is expensive!

What you need to do is perform your own thorough and complete due diligence. Watch some rehab videos but stay away from "Flip this House" which is a reality TV Show filmed to create viewers and lean more to "This Old House".

The next thing is location. What is the max you have seen a home sell for in a 1-mile radius? Can you buy this home and rehab it to sell for less than the maximum price and still make a profit. 

Get three estimates for the work. Add 10 to 20 percent to the mid-range estimate to allow for the for unknown factors discovered after you start because you may not have the background to perform due diligence.

Go join the local Real Estate Investors Association (REIA) in your area. In Chicago go see Jane Garvey at the Chicago Creative Investors Association. IN Springfield check out the Springfield Area Landlords Association (SALA). In Southern Illinois check our Illinois REIA. We are all members of National REIA.

In Illinois, a series LLC lists all of your properties online with the Secretary of States Office under the same name. Have a problem with property #7 and the plaintiff attorney can go online and find everything you own.

I am not an attorney and do not play one on television. In my opinion it would be better to own each property in separate land trusts and have one LLC as a managing company. The LLC owns nothing but a check book. Each Land Trust is recorded separately. Harder to find your assets that way.

An LLC is only as good as your record keeping. Fail in one thing and you can lose everything owned by the LLC.

You need to do more research in your state, starting with "Charging Orders".

This is a dinner and networking meeting with a real estate topic discussion. Guest fee is $10.00 to attend and cost of meal.

The Garn Saint Germain Act (1984?) allows you to place real estate in a land trust for estate planning purposes and the bank will work with you. This also gives you privacy and avoids probate. Then your LLC leases the property from the trust with the right to sublet the property. You should actually set up a lease and print it. The LLC can then manage the property. If the LLC gets sued, it owns nothing but the contracts and a check book.

If the LLC is a single member, it is filed on your personal tax return. No asset protection there. A multimember LLC must be a separate income tax return. You can choose Partnership, S Corp or C-Corp.

Be careful when applying for a tax ID number for your LLC. If you indicate which entity you choose, then a tax return must be filed for that tax year. So apply for a C-Corp in Dec a return is due 4 months later.

My article in the forums indicates ho the State of Illinois just gutted the LLC asset protections.

Good Luck and Good Investing.

Join Jane Garvey's real estate club. She Runs the Chicago Creative Investors Association (CCIA). They just sponsored a Cash Flow 101 Game night and had great turnout.

Not aware of the exact circumstances.

Personally, I would never open a Series LLC in the State of Illinois. The series is a link for plaintiff attorneys to look up every property in the series. Get sued on one get sued on all.

Recently the Illinois legislature gutted most of the protections that made an LLC a desirable entity choice in Illinois.

As of January 1, 2025, several new Illinois laws have come into effect, impacting Limited Liability Companies (LLCs) in various ways. Key changes include:

1. Personal Liability of LLC Members and Managers

Senate Bill 2765 amends the Illinois Limited Liability Company Act to clarify that certain provisions do not limit the personal liability of LLC members or managers. This change emphasizes that under specific circumstances, courts may "pierce the corporate veil," holding individuals personally accountable for the company's debts and obligations. ilga.gov

2. Pay Transparency Requirements

House Bill 3129 mandates that employers with 15 or more employees, including LLCs, must include pay scales and benefits information in all job postings. This measure aims to promote transparency and equity in compensation practices. icpas.org

3. Personnel Records Access

House Bill 3763 expands the Illinois Personnel Records Review Act, requiring employers to provide employees with access to a broader range of personnel records upon request. Employers must comply within specified timeframes, and non-compliance may result in penalties. icpas.org

4. Pay Stub Record-Keeping and Access

Senate Bill 3208 obligates employers to furnish employees with copies of their pay stubs within 21 calendar days of a request, up to twice in any 12-month period. This requirement applies even after an employee's separation from the company. icpas.org

5. Restrictions on Mandatory Meetings

The Worker Freedom of Speech Act prohibits employers from requiring employees to attend meetings that communicate the employer's stance on political or religious matters. Retaliation against employees who decline to participate in such meetings is also forbidden. knowledge.dlapiper.com

6. Employment Verification Procedures

Senate Bill 508 prevents employers from imposing work authorization verification requirements beyond those mandated by federal law. It also prohibits adverse actions against employees based solely on the receipt of a notification regarding work authorization discrepancies. icpas.org

LLCs operating in Illinois should review and, if necessary, update their policies and procedures to ensure compliance with these new regulations.

The above is an excerpt from the Illinois REIA Saturday Summary.