Transcript:
Hey there, it’s casey Denman here from TaxSaleAcademy.com
Thanks so much for joining me today! In this video I’ll be answering this weeks question from Joel. He wanted to know if he should setup an LLC now or wait until he has purchased a few properties.
Joel, thanks for your question. First off, I do want to note that I’m not an attorney or CPA so be sure you asked the appropriate counsel to make sure you make the best decision for your specific situation.
So, if you’re not familiar with an LLC it’s limited liability company. There are a number of advantages with using an LLC to invest in real estate, with the primary reason, for most, being the asset protection that it provides while still allowing for pass through taxation so you’re not double taxes. In this type of situation you’ll own the LLC, and then the LLC will own the real estate that you’re purchasing.
I’ve done other videos about LLCs, so if you’d like to learn more about them just search my channel with the letters LLC and you’ll find them.
But, back to this question. Should you form that LLC now or wait until you have a few properties under your belt?
An LLC is a legal entity and must be treated as such. LLCs do take time and money to setup and then they’ll have to be accounted for on your yearly taxes, which also takes time and money. Setting up an LLC, although relatively easy, is a serious decision because you must do it correctly and play by the rules. It’s not something you just decide to do then forget about if you no longer want to mess with it.
As far as forming the LLC before investing, it really depends on the specific investor. And again, this is not legal or financial advice but generally it’s a good idea to setup an LLC prior to buying your first property. So, in this business, I’d wait until you’ve learned the ropes, maybe attended an auction or two and you’ve researched your properties. When you thing that you’re confident and comfortable investing, then start the LLC up. I would not suggest doing it prior to learning about tax sale investing and insuring that you’ve got a handle of finding deals, otherwise it could be a waste of time and money.
Of course, yes, you can invest without an LLC. I’ve done it before and there are some reasons for it.
One of the most important aspects involve what exactly you’ll be buying? The liability behind a vacant lot in the middle of the forest is usually much lower than the liability behind that dilapidated factory you bought that’s the eye sore in the middle of the town and is being used as a mask shift drug house.
Use some common sense here, of course. While I personally think some sort of holding entity is always a good idea, if you are going to do a few deals in your personal name before investing the time and money into setting up an LLC, at least us some common sense and think about what you’re buying before deciding how exactly you’ll hold title.
Hopefully this has helped you out Joel. If you have any other questions or if anyone watching this video has any questions, please feel free to leave them in the comments below this video and we’d be happy to answer them or might just do a video like this one.
For more information on TS investing, just head to TaxSaleAcademy.com.
Take care, by bye.