If you just hold the paper, then there is no reason to set up an LLC or other business entity. You can separate the business and personal activities just by using different bank account and books.
If you plan on owning the underlying property, such as foreclosing the tax lien and evicting the then former owner, then some sort of protection against lawsuits is in order. There are a lot of LLCs springing up because the offer many of the same protections as a Corp, but pass the profits and losses directly through to your tax returns. Consult an attorney on the best method for you.
I have money to invest. I hear about tax lien certificates, buying below market, and such. But when it comes to all this, is it better to go in as a, say, LLC or an individual? What are the pros and cons for each? Can someone help me?
Posted by John Corey on June 20, 2007 at 04:52:59:
Everything comes with liability. Some activities more than other
activities.
The LLC (or similar) is a way to create a firewall. It could be your day
job that creates most of the liability actually.
There are also tax planning details.
Have you read the book Wealth Protection by William Bronchick. Not
too long, easy to read, low cost and available at many bookstores. That
book is a great starting point. As it is written by the moderator here
you can get information as to follow up information.