All Forum Posts by: Jeffrey S. Breglio

Because of that "doing business" in requirement, doing LLCs out of your home state doesn't usually make sense (although, on rare occasions and specific reasons, I have).

You family living trust provides no protection. But it is incorporated into your overall asset protection plan, usually through transfer on death agreements.

A "land" trust can be used for additional privacy, which can be helpful in asset protection as well.

Jeff

Kira, below is a response to another thread I recently made:

First recommendation is always the state in which you live if you have properties there.

When you have out-of state properties, a typical scenario for my clients is that we set up an LLC in their home state, title the out-of-state property in a trust, and then make the beneficiary of the trust their LLC. This works because an LLC must be registered in any state that it's doing business, regardless of where it's set up. If the trust owns the property, and particularly if you've got a third party property manager, then you don't have to worry about registration, registered agents, fees, etc. in a bunch of different states. Trust are not registered. But as the beneficiary of the trust, the LLC provids the protection

An issue arises with the "doing business" definition. The LLC has to be doing business somewhere. So setting up, let's say, a Delaware LLC, when you live in CA, probably won't get around the CA LLC tax unless you argued to CA that you run your business our of DE and pay DE taxes. Every state wants its taxes and someone is going to collect it. So this is a discussion with your accountant and your attorney if you want to set up an LLC out of the state you live in.

And yes, CA is tough with LLCs with that $800 a year tax. But if you live in CA and run your business out of CA, in an audit CA is going to say your LLC is conducting business in CA and you need to pay the CA tax.

Hope that helps!

First recommendation is always the state in which you live if you have properties there.

When you have out-of state properties, a typical scenario for my clients is that we set up an LLC in their home state, title the out-of-state property in a trust, and then make the beneficiary of the trust their LLC. This works because an LLC must be registered in any state that it's doing business, regardless of where it's set up. If the trust owns the property, and particularly if you've got a third party property manager, then you don't have to worry about registration, registered agents, fees, etc. in a bunch of different states. Trust are not registered. But as the beneficiary of the trust, the LLC provids the protection

An issue arises with the "doing business" definition. The LLC has to be doing business somewhere. So setting up, let's say, a Delaware LLC, when you live in CA, probably won't get around the CA LLC tax unless you argued to CA that you run your business our of DE and pay DE taxes. Every state wants its taxes and someone is going to collect it. So this is a discussion with your accountant and your attorney if you want to set up an LLC out of the state you live in.

And yes, CA is tough with LLCs with that $800 a year tax. But if you live in CA and run your business out of CA, in an audit CA is going to say your LLC is conducting business in CA and you need to pay the CA tax.

Hope that helps!

Jeff

Best first steps are to attend the local REIAs. They are some of the best in the country. Salt Lake REIA, Utah REIA, Utah Valley REIA and Northern Utah REIA. You can google them. They have monthly meetings, most have luncheons and all are packed with great education and networking. From there you can build your team! Welcome to Utah!

Jeff

I create hundreds of series LLC for clients all over the country and use them for my own investing. Here are some simple answers:

1. You can use one bank account for all series. Your bookkeeping should be kept separate, however. Think of it as an escrow account for multiple clients. It's the bookkeeping that's more important than how many bank accounts.

2.Your agreement between the series LLC and the property management LLC should be arm's length and reasonable market terms. That is, put it in writing and have the PM company charge some fee for management. Run them like true separate entities.

3. You take distributions out of any LLC by simply transferring money out of the account. Remember that only the members get distributions and must take them according to percentage interest. You may pay yourself a salary on the PM LLC. Go over this question with your accountant to maximize tax savings--as that depends on a number of things.

You should really have a good attorney and good CPA on your team. The series LLC is a great tool. But does come with some particulars, like titling, contracting and bookkeeping. Those have to be done correctly or you'll lose the separation of liability that the series provides. But once you get it down, it's easy. I often find that most investors that create series LLC because they've been sold on it, don't use it correctly. I provide education to my clients so they know what they're doing.

Jeff

Arthur:

Welcome to BiggerPockets. This is a great forum to find out more about REI and RE Law.

Call 801-560-2180 if I can be of help in your Real Estate Law needs.  Also, I send out a monthly newsletter that may be of benefit to you.  If you would like to be included on my newsletter delivery list, please share your email address.

Thank you and Best of Luck in your future.

Jeff

Hi Karen:

  Welcome to Bigger Pockets and the world of Real Estate Investing.  There are lots of ways to learn and become more connected within the Real Estate community.  I send out a newsletter and would be happy to add your to my contact list.  If you'd be interested send me your email address and I'll be sure to include you.

 Thanks,

 Jeff  

Jake:

Congrats on landing your first deal.  Real Estate is a great way to see your financial future

There are numerous ways to make some great networking connection.  You can attend any of the REIAs (Salt Lake, Utah, Utah Valley, Wasatch and Northern Utah). They have great meetings and many have luncheons as well.  Also, putting a team together is important. I would love to be considered to be part of your team.  Please call [removed phone number] and set up a time for us to chat about ways I can help in your real estate investing.

Have a great day and continued success!

Jeff

Bill is correct. Not a lot of note buyers here in Utah. So not a lot of networking with knowledgeable people. I do have a few clients that have buy notes and really like it. They buy nationally. The risk is know the market in that area, management of the property. They seem to make it work.

Jeff

I've been setting up business entities for my clients for 15 years. Most engaged pretty heavily in real estate investing have TWO types of entities:

S-elected LLC (this is an LLC that is taxed like an s-corp, I rarely set up INCs). This is a TAX SAVINGS entity for income derived from active pursuits--bird dogging, wholesaling, flipping, real estate commissions, contractor work, etc. As active income, it has an additional tax which can be reduced by running this money through an s-elected entity. BUT YOU NEVER PUT A LONG TERM ASSET, like a rental, in this kind of entity!!! If you're new and not sure how much you'll be making, you may not need this entity. Although I still recommend setting up the LLC to have the business name and entity (you can also start showing income for mortgage qualification) but hold off on the s-election until the income dictates a need for tax savings. The s-election requires some additional hoops to jump through and why jump through them if you're not making that much money.

LLC or Series LLC. This is an ASSET PROTECTION entity for holding rental properties. This is NOT s-elected,, but taxed like a partnership (because I always recommend more than one member on these). Rental income is passive income and there are no tax savings to be realized from the s-election. You can run your other real estate income through this kind of entity, but not get the tax savings you would by running though an s-elected LLC.

C-corps. I almost NEVER set these up for clients. Rarely are they beneficial, and more likely there will be additional taxes.

Hope that helps.

Jeff