I did register in my state also, But I have learned today that I tossed a lot of money out the window. I actually was on legalwiz.com this afternoon, I will buy the books etc. and learn for my self. Thanks for all the insight. Guess I’ll have to make that money up in a sweet deal. Thanks again. Glad I found this site. I have learned a lot in the past few months
An LLC will help protect the individual properties and yourself from each other. If you do not have much equity in the properties than they can be lumped together. If you are just getting started and don’t have a high net worth than don’t bother complicating things with an LLC.
Gary Sutton of the rich dad group says yes, but he is an attorney that sets up LLC’s, I don’t see how you could have positive cash flow if you spend $1200 for a new LLC for every property. You likely would not cash flow for the first year or so. I have thought about putting a couple of properties into an LLC and then starting a new one. What do those of you with 30, 40 rentals do??
Yeah, I am realizing that was extreme. I set it up through Nevada Corporate Centers. I set up a Wyoming LLC because they are supposed to provide the most protection. I will have to investigate things a bit more. Do you set your own up? Or do you use one of these internet legal co.?
The key is protection of your assets. You want to protect the equity and not the debt. Hence if you have no equity and 100 properties you have a lot less to lose so a lawyer will not fight you for it.
There is also the concept of fire wall. Keeping a problem in one area from spreading to all your other assets. Some grouping makes sense rather then an LLC for each and every property unless the costs and hassles are low.
CA has a fee for LLCs that starts at $800 and the fee is due every year. It does not matter if the LLC was set up out of state. For the LLC to do business in CA it needs to register with the franchise tax board and pay the annual fee. The fee caps out at $11,200 or something close to that. The fee is based on value of the entity so value of the property and not the equity.
I mention the CA example so people realize it is not always the up front filing fee that you should consider.
BTW - If a lawyer sets it up you are buying a share of their E&O insurance if they get things wrong.
Posted by Rich[FL] on August 16, 2005 at 19:16:14:
Docniss (and Eddy) -
I do set me own up using Bronchick’s materials. If you truely want to understand what to do and why, I suggest getting his materials on asset protection which includes (I believe) instructions for setting up entities. For the $1200 you spent setting up your corp, you probably could have purchased all of Bronchick’s materials. Then you would have known the whys and wherefors of setting up entities for asset protection, and, more importantly, how to maintain their integrity over time. While setting up a Nevada or Wyoming entity has it’s advantages, do you know you also have to register as a foreign corporation in each state you do business in? That right there will negate some of the “privacy” you have tried to set up and paid so dearly for. Now you must maintain registration in both states.
Now don’t get me wrong - this is exactly the right answer for some people, but certainly not for everyone. It all depends on what your needs and goals are for each entity you set up. If nothing else, getting some book work (Bronchick’s materials or somebody elses) will get you educated enough that you can then talk intelligently with lawyers you’re interviewing to help take you to the next level. You’ll be able to quickly tell when they’re blowing BS because they THINK they know what they are talking about.
Right now, my needs are basic and I set up my own using Bronchick’s materials. It’s easy here in FL and can be done over the internet in a few minutes (once your paperwork has been filled out in advance - articles of incorporation, etc.) It’s really quite easy. I (my LLC) was even able to pay cash for an old home, used my credit card (a “loan” to the LLC) to rehab and (working with a local bank) get an interest-only refi loan for this house totally within my corporate name. Now when I refi to a full amortized loan, I’ll have to QC to myself personally, get the loan, then QC it back into the LLC, at least according to this bank. Maybe another one won’t make me do that. Have to do some research.
I hope I answered y’all’s questions. I know I sometimes sound like an ad campaign for Bronchick’s materials, but I don’t know of any other legal types out there who are offering this type of material for such a reasonable cost. And it really is vital information for investors to know if they’re really interested in asset protection.