Becoming Incorporated - Posted by Alex

Real Estate Investing
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Posted by raelynn mitchell on December 29, 1998 at 22:59:05:

as income from LLC must “flow through” to something…possibly you the person. C-Corp is separate entity that does not flow through. Flow through may be good for rental income, but for flipping it may not be the way to go.

Check out the articles here on the website, and read through ALL of Mr. Bronchick’s questions/answers in the legal section. I believe he covers this issue.

See http://www.creonline.com/articl96.htm for his coverage of this issue.

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Becoming Incorporated - Posted by Alex

Posted by Alex on December 28, 1998 at 15:15:59:

How would a person become Incorporated? I have found times where I should of been Incorporated. One is to protect myself and I beleive to maxamize profits would be another. So if anyone can direct me to whom I might contact to start the process, it would be greatly appreciated. Thank you, Alex

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Re: Becoming Incorporated - Posted by Terry Bowers

Posted by Terry Bowers on December 28, 1998 at 20:21:54:

I believe the more prudent course would be to form separate land trusts for each property. I recently read some very interesting infomation on this at the mrlandord.com website…

Some of the advantages are:
privacy
mortgages without personal liability
avoiding due on sale clause
easy to form trusts
transparent to the IRS

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Re: Becoming Incorporated - Posted by Berwyn

Posted by Berwyn on December 28, 1998 at 17:29:32:

While we’re on the subject, is it ever worthwhile for a sole proprietor to become incorporated, and at what point (how much assets) does it become worthwhile? In my case, I’m about as sole a proprietor as you can get, a complete one-man show, single with no heirs.

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Re: Becoming Incorporated - Posted by DavidV

Posted by DavidV on December 28, 1998 at 16:28:20:

Try the sec. of state of the state you live in. There is also a good course here by Bill Bronchik that tells you how. Your local library will probably have info on this as well.

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My understanding is… - Posted by Duane

Posted by Duane on December 28, 1998 at 23:46:07:

that while a land trust does provide some of these things, you can still be held liable in certain cases, and you are not completely transparent to anyone (providing they do enough research).

I was going to post this question anyway, so here goes, wouldn’t it make sense to incorporate first, then buy your properties in a land trust that the corporation acts as the beneficiary? This way, in the event that someone does alot of research on the trust, all they will find is that it is owned by a corp. and you will NEVER be held personally liable, plus you can avoid the DOS clause because you can transfer the beneficial interest of a particular property.

Keep in mind, I am posing this as a question, NOT as advice. I’m trying to see if I understand this concept. Thanks.

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Re: Becoming Incorporated - Posted by John

Posted by John on December 30, 1998 at 15:22:26:

Your post suggests that perhaps you are confusing incorporating with estate planning. The idea behind incorporating or forming an LLC is to avoid personal liability for your business activities. This should be a concern to any investor, regardless of marital/family status. There are, of course, tax implications of your decision which must be taken into consideration, and certain entities may be better suited to a buy and hold strategy versus flipping, for example, but a major benefit to forming a corporation or LLC is the avoidance of personal liability.

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Re: My understanding is… - Posted by Alex

Posted by Alex on December 29, 1998 at 10:28:56:

Thank for all the input,it has been very interesting. I have all intention of becoming incorporated. I just woundered how soon or when is the best time to install this in the business. I do beleive that I need to protect my interest Thank again to All , Alex

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Re: My understanding is… - Posted by MilNC

Posted by MilNC on December 29, 1998 at 13:25:34:

Here are just a few suggestions:
There are IRS-sponsored workshops on starting a small business-Don’t have it at my fingertips or I would
post it.

Contact your state’s secretary of state for info on starting a biz in the state.
Contact your local community college for workshops.

I have tried to get answers to this also, but without specific results. Two schools emerge on this board,
the “just do it”, school and the “know what you’re doing school”.
Posting now as a question to all, is it true that (1)in a flip, you never actually own the property, and that
(2) therefore this is an area where you can get started
without incorporating first?

Now, as I see it, you have the tax advantage/disadvantage issue, the liability issue, and the public image issue (business image issue) and the
privacy issue.

As for taxes, I am not in the “why worry” school. I already have an acountant, just on general principle, and because it’s not something I do well. I let her worry for me.

For posting here, you might be better off in the future to state your state in your name or title of post.
Depts. vary-- I was surprised to learn that in NC
to find out what was needed to be lic. as a mortgage
broker I had to find the Banking commision under the Dept of Commerce.

Jackie/Dallas posted some excellent info on incorporating in Nevada due to the heightened privacy.
Then you would want to look into how your state treats
or honors foreign corporations-is privacy maintained or not.

This board is very helpful,but state laws do vary as to
whether you can be paid a finders’ fee, need a licence,
landlord/tenant laws, foreclosure–these are all different. So you need to have a source of state info.
That’s part of your education too.

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Re: My understanding is… - Posted by Alex from Michigan

Posted by Alex from Michigan on December 29, 1998 at 22:08:31:

I do thank everyone for the information. To let you know I contacted my CPA and ask her what my next step should be. She suggested I should become Limited Libilty Corporation (LLC). This is one step from becoming Incorporated. So it sound like that is the way I may go, thank again to all. Alex