Sole Proprietorship or LLC?

Setup a LLC as a sole proprietorship. It is the ideal business type for what you are doing and makes taxes a breeze (assuming you don't have employees, not that the taxes will be terrible if you do).

Just little more input. The individual properties can be transfered into Trust that are held in a LLC as an extra layer of protection. Try not to put more then $750,000 in equity value into a single LLC. Also make sure that the LLC has a million dollars insurance on it. Once your values reach this level you may want to consider a NV Corporation as the parent Corp. of the LLCs. Nevada does not collect very much information on Corporations when you file. This also makes it harder on a lawyer if they are trying to pursue a lawsuit against you.
As always check with your Lawyer (who should be part of your team) for your personal situation.
Good luck!!!

Wow, I just checked out legalzoom.com to inquire about starting an LLC. After 75 days of activation you must pay a $800 tax. ouch!!

Russell

Is this California? That is the state fee and has nothing to do with legalzoom. It is also an ANNUAL fee... so do every year. Most stats have some type of fee but not as hefty as Cali's.

Legalzoom's fee is a flat fee (125??) which is also a ONE time fee. I used Budget Corp. You will also need to pay a resident agent in the state you do business in.

Thanks, guys, for the advice!

Sounds like I need to get a lawyer and a good accountant ASAP. Should specialize in real estate, I'm guessing? Up 'til now we've had just a few rentals, been kind of low-key. I've done all the bookkeeping and taxes, etc. myself, we've done all the renovating as a family. Our youngest is now a junior and, since getting Dean's book, I've decide to go full-speed into investing. We've closed on 4 properties in the last couple months, with another coming up next week. I've got offers in on a few more, and am setting up viewings pretty much every day. (Our area is hot with REOs). Anyway, I was wondering about having employees under the business we're going to set up in my name, specifically my husband & son. (My husband would mostly supervise, as he does work for a good company through which we have our insurance, but this could be a full-time job for our son)
Any thoughts?
Also, the bank we go through is just awesome, and lightning quick when I want money, but I'm thinking I might exhaust that outlet pretty soon (or maybe not? we'll see). I seem to have access to so many "deals of a lifetime" right now. Anyone recommend a good broker or lender?

Thanks for listening,
Love playing the real estate game!!!!

Rina

You have done great to this point, now it is time to ad members to your team. Referrals are a great way to get a lawyer and cpa. To really get the most for your money you want them to be real estate investors as well. By doing this you are getting team member that really understand the business your in. I asked my mortgage broker (who is a r.e. investor and her husband is a contractor) who she uses. Do you see how one team member can help to find other get members.

My brokers only work the states I'm investing in. Ask the bank contact you are dealing with now if the have any relations with other bankers in your area. If they do, ask them for an introduction. If they value your business they will do it.

A great CPA will help you to structure your businesses properly and show you the best plan to meet your goals today and into the future. My CPA has saved me tens of thousands of dollars this year alone. She also helps me to understand all the new rule for this year.

You're doing great!!!!

Keep it up.

Thanks CFK!!, Can I call you that?
I see now that I need to add to my team. So far, I've got some of the feistiest ladies in the business! Gail (real estate agent), Emily (loan officer), Pam (appraiser), Sue (title company rep), Gerri (insurance agent), and then the world's most amazing contractor, my husband! I'm gonna be hunting hard this week for 2 more players; Attorney & CPA.
Thanks for sharing the wisdom and encouragement!

I would like to encourage all of you just starting out, you can do it!!!! You're gonna have so much fun! By this time next year, you're going to be looking back and saying "Wow, I'm glad this was the year I read Dean's book!" And then when you're standing in your glory, share what you've learned with someone else. You're gonna make the world a better place!

Rina

Glad to be of service. I always love hearing when family is involved in the business. All luck in your search.

I have a plan to have my first deal in motion by May 1st.
Is it necessary for me to have an LLC if I plan to do a lease option?
If so, will I have enough time to create an LLC in order to achieve my plan by May 1st?

Any advice would be greatly appreciated. Thank you!

Hi erica,
I need a little more info.
1. Is this lease option for you to personally move into?
2. Are you in CA or NV? (I went to your profile.)
3. Have you already signed any papers?

Let me know. Thanks.

CashFlowKing & other investors:

I realized that making a deadline of May 1st may be too soon. This will be my first deal so I don't want to rush it; I want to think it out clearly so as to make the right decisions. I know I don't know everything about RE Investing, although I just want to jump in head first to get into the game. I've given myself until the end of May to have my first deal in the works.

To answer your questions, I'm not interested in a lease option for me to personally move into. I want to find a property, lock it up in a lease option agreement, then find a buyer that I can assign the contract to.

I'd love for any assistance or advice you have so I can get moving on this!

Thanks a lot!

Has anyone used the Tax Club that they mention as apart of your team?

If so, do you like what they offer and are you satisfied with them?

And 1 more question - do you think i would've been smarter to have a team like the Tax club closer to me instead of them being so far away. Just confused if I did the right thing because it seems most of you have people who are close to you so now you have that one-on-one connection with them.

Erica,
I see you intend to lock up a lease option and then re assign it. It seems a little risky to me unless you are prepared to move yourself. I think most sellers are a little leery about allowing a lease option to be re assigned. But as you know anything is possible. I think it would be easier to locate a home at great price, lock it up and re assign. But, I would love to read how you made it work.
Just make sure your contract allows you the flexibility that you need.

How so you plan on making your money. Would you charge a finders fee?

Good Luck! Zeek

JC

I am a member of the Tax Club and I truly believe they are a great tool for your Business. Especially if you know you are going to making deals and own real estate. The Tax Club is proactive and helps you throughout the year. Not just at tax season. They specialize in what we are all trying to do.

Thanks for the insight and letting me know there is someone else out their who is a member with the Tax Club. By the way, Did you buy into all of there programs or just certain ones, just wandering.

I too am wondering whether to buy into The Tax Club. I just spoke with someone from the Club today. Their services sound good. After a 45 minute conversation, it was suggested that I might want to start with an S-Corp eventually with LLC's under it. I'm scheduled to talk with the rep again on Monday to let him know if I'll be joining. There's a setup fee of $3890.00 and a maintenance fee of $49.95 per mo. The fees seem to cover Corporation setup, filing of taxes and assistance when needed. They also set up a resident agent, and overall assist with tax planning etc.

It sounds great, but I'm wondering if anyone has a better suggestion..or if this (The tax Club) has been helpful and worth it??

LBM,
The tax club will set up your business structure in order for you to gain as much tax advantage as possible. Their services seem overwhelming at first but you will get the money back as a tax right off at the end of the year.

That's great to know. Thanks for the information.

Hello Everyone!

Regarding LLC's, you can also go the SBA (Small Business Administration) website: www.sba.gov/smallbusinessplanner

You will see the #'s 1, 2, 3, & 4 (tabs)
#2 Tab - "Start Your Own Business"
"Name Your Business"
"Choose A Structure"

Other links will be given to further explain Tax Pro's and Con's of each type of structure.

I hope this is helpful

I will go to the site and check it out. I checked out Legalzoom yesterday. What's confusing to me is coming up with a business name to put on business cards and flyers etc. It seems to me that there must be a process in coming up with a name. I'm wondering if I need to research whether someone else has the name, but don't know how to go about it. I'd like to get cards printed up but feel a bit stuck about the name. Any suggestions?

I'm pretty sure legalzoom will do a search for you. Course, if you join the tax club they will take care of all the searching for you. They will make sure you are up and running with one of the names you choose.
Zeek

Thanks 4 the info. I'd actually like to join the Tax Club. I think that that would be the safest/easiest way to go. I guess I just need to refigure what I can afford. I think that once I joined, they would do the research needed for a business name and at the same time, advise me as far as taxes etc.

Laurie,

When I filed for my Wisconsin LLC online in April, there was a database search there to check if a name had been used already. It also gave good instructions on how to choose a name. If I remember correctly, it may have even had examples of names that were available. I know you're California, but I'll bet they have the same.
The Tax Club will do that for you and will also do a National search. It sounds like they offer programs that would take care of EVERYTHING you need to start up your business and keep it running smoothly.

Here is a link to some good info on naming your business.

http://www.entrepreneur.com/startupbasics/namingyourbusiness/archive1162...

Good job, Laurie, on your progress. And, Zeek, thanks for all the great info.

Rina

Which business entity is better? If I am buying and selling, which is better? If I am buying and renting, which is better? If I am doing a lease option, which is better? What are the differences when it comes to taxes? I have asked this question to the tax club and was told that an LLC can elect to become a corporation so it doesn't make a difference. Can someone help me understand the tax advantages or disadvantages of the three?

Thanks
DCB Investments

Thanks for the website info. I'll check it out. Also thanks for the pat on the back

LLC. Not only will a corporation provide a certain degree of legal protection, but it offers great tax benefits.

Dean's class recommends using a standard C-Corporation, but make sure that the cost of doing business (i.e., salaries and benefits) reduce profits to below a taxable level (or at least until the tax rate is only 15%). The advantage is, besides the fact that it reduces taxes, all these expenses puts money into the pockets of the shareholders/employees.

Zeek

Me and my partners live in different states, with the intention of buying properties in both states. Does anyone know, if we form our LLC in one state, can we place properties from both states into that LLC OR do we have to have one LLC per state we do business in.

Thanks in abvance for your comments.

An LLC (or a corporation, or a Limited Partnership) can do business in different states. However, you may have to be registered as a foreign entity (another state, not another country) in any other state you do business in (sometimes owning property is deemed to be doing business). States with a state income tax may have additional requirements. Each state may require annual license fees/tax (Calif = $800). Check with the Secretary of State in each state to avoid problems. A Limited Partnership may have fewer requirements, but it needs both a general partner and limited partners, so it's a bit more complicated.

cactusbob

That's kind of what I was thinking. I mean, other types of business' aren't limited to doing business in the state they are registered in.

My partners and I have decided to talk to an attorney before we make any hard and fast decisions. I'll keep everyone informed.

Rob

Hi, I live in D.C and i am having the same problem, you mention the words lease option to be re assigned and they say ooooooooooh no way. I have a friend in Va as well and same goes for her area as well.