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Yes, I think we are on the same page with this. A business entity is definitey an advantage for the reasons you are stating. My beef is with all the "gurus" out there who think it offers some magical way for an individual to somehow not pay taxes that they would have otherwise owed.

Nor am I.

But that's not the question. Nobody is talking about wage income or being an employee vs. not being one. The question is about real estate income. I don't think it makes one whiff of difference IRS-wise if the official owner of the property is an LLC or an individual. In fact, unless you specifically opt for corporate taxation (and risk higher taxes, though there may actually be ways to save money here), the LLC is specifically designed to be a "pass through" entity as far as taxes go, right?

If your getting interest on that loan, then the interest would be taxed. Remember, the money you loaned your business in the first place was already after-tax money. All you are doing is transferring money from your account to the business (the original loan), then back to your account (paying back the loan). You haven't gained anything. If there is interest, then maybe the business can deduct it, but then you'll have to declare it on your personal taxes as income anyway, so it would be a net wash.

I'm just not convinved I've seen any financial reason -- i.e., at the end of the day I'll have more money in my pocket because I did it with an LLC rather than in my name.

The Receiver, with the Court's approval, has the authority to invest the money. He proved it already by moving funds from a low-interest account to a higher-interest account. In the interim report, he also discusses the possibility of taking some of the raw land and developing prior to resale. He needs the Court's approval, but, from what it sounds like, no one else's.

I like the idea of connecting the inflow to the outflow and thus eliminating all "non-hotwater-heater" causes. I hadn't thought of that. It turns out it was your other, seemingly obvious, suggestion that solved the problem. I flushed the hot water heater (turns out it's pretty easy to do, I had just never done it before). In the process I discovered that the inflow to the tank was feeble at best. It turns out the inflow faucet was stuck. It was on, but no on by very much. I messed with the faucet some, it loosened up, and then bam -- the water is a-flowing. No plumber for this guy. (With my luck, though, I'll probably find the house flooded tomorrow.)

Thanks for the help.

I'm fairly certain that whether something is a "business expense" or not for the purposes of income tax has nothing to do with whether it is bought by a business or not -- it depends upon how it is used. You can deduct legitimate business expenses from your personal taxes, you don't need a business entity to do this. Also, if you use a business to buy something like a car and then use it for personal use, you better declare some of that car as personal income or you might find yourself in a bit of hot water.

There are a lot of misconceptions about the advantages of businesses, and I think buying pretax is one of them.

[Of course, none of the above is legal or tax advice and you should seek the services of competant tax and legal professionals].

I still haven't been convinced by anyone (through multiple discussions) that an LLC provides better protection than a personal liability umbrella policy. Say you have a $2Million umbrella policy. Your assets, including real estate held in your name, are protected for any claim up to $2Million. So, as far as I can tell, holding the property in an LLC would only be a strategy for protecting assets if you think a claim against you might exceed your $2Million coverage. I can't believe that any sole owner (or husband-wife owner) LLC would be able to stand up to a good lawyer and a suit with a payout potential in excess of $2Million. I could be wrong, of course, but it seems unlikely to me.

And if you do hold the property in an LLC, how much liability insurance can you (or will you) get for it? If you have multiple LLCs will you get $2Million policies for each? Say you get $500K per LLC -- well then any potential claim between $500K and $2Million against the LLC would cause you to lose the property(ies) and any other assets held by the LLC (they wouldn't be protected by your personal umbrella policy), while if you would have held them personally they would have been protected by such a suit. I would also guess that the insurance is more expensive for a company, rather than an individual, but I don't know that.

Also, it's not either/or with the umbrella policy, it seems to me that you need it no matter what. If you are in a car accident (unrelated to your real estate activity) and there is a major suit such as wrongful death, your ownership of the LLC would be an at-risk asset. It would in no way be protected, since the LLC itself is one of your assets. So, it seems to me that you absolutely need a personal umbrella policy regardless of how you hold real estate (I have seen some crazy limited vs. general partnership setups, but that's another story). I just don't see how the LLC provides any additional benefit, and I can see how it could potentially cause less protection.

I do believe there is some benefit by having the property not in your own name because it may "hide" your assets from a casual search and prevent a lawsuit from ever happening if a plaintiff doesn't see how much you are worth, but again I doubt this has much of an effect on a case that could have a $2Milliion+ judgement.

[These are just my non-professional, non-lawyer opinions and I picked values at random -- don't take any of the above as any kind of professional advice. I second the idea of consulting with an attorney.]

Here's another question. I have a house that had been "winterized" (before I owned it) because it was a foreclosure and would be vacant for a long time. All the utilities are now on, and the only problem is that the hot water is not functioning properly. All faucets act the same. Specifically, when I turn the hot water on I get a little bit of flow (never hot), then sputtering as air comes out, then it just goes silent. As far as I can tell, the hot water tank has filled and the heating mechanism (gas burner) is working (it makes the normal sounds and occasionally I feel the outgoing pipe is warm).

Everything I've found says to run the hot water until the air stops and I get a continuous flow of water, but I never reach that point. Is it possible there is air trapped in the lines (from the winterizing) causing some kind of air lock, or is it more likely a problem with the hot water heater itself? I don't want to call a plumber if there's a simple solution I'm missing. Any thoughts would be appreciated.

Why would you want to keep a property that is losing you money each month? I don't see a reason to keep it. If you didn't own it, and someone offered to sell it to you at market value and a negative $500 cash hemorrhage per month, would you buy it? I wouldn't pay $500 per month on the hope that someday I'd be able to get money back because of apprectiation.

Also, why no option to sell the townhouse and rent a house? If buying a house is too big of a squeeze right now, you could invest the equity from your townhouse sale elsewhere and you might end up better off. Just something to think about.

My guess is that it was a financial decision. They give him the living expenses to make it easier for him to consent to the decree. If he had appealed the court order there would have been a lot more delay and legal expense. Both would have eaten up a lot of money. Remember that he is legally entitled to the presumption of innocence until proven guilty by a jury trial. By getting him to consent, rather than forcing a court battle, a lot of money has probably been saved. Look at how much he was about to spend on new headquarters, corporate jet, etc...

Thank you both for the info. I may be getting cold feet on this one. I've got the carpet guy giving me an estimate today. I feel confident I could get the job done now, but at this point I'm mostly worried about how long it will take me (working alone) to get it in. I only have weekends to work on this stuff, and I've got a couple other things there to do myself. I haven't decided which way to go, yet.