Forming an LLC

[caliguy101]

Hi everyone I'm new here and have been in the REI business for years. Question; who do you guys use to form your LLC's and corporations? Attorneys? DYI? Internet companies? 

I used to use an attorney for form my LLC's and recently started using this service.

I’m just curious at to how people in my industry form their entities.

thank 

[TMCG]

i use cpa.  you could do it yourself as well.

how many businesses have you started?

[SeattleCPA]

My comment about using an LLC for real estate...

I really kind of think that LLCs are over-rated for real estate investments.

Can't you get, practically speaking, all the liability protection you need by just buying a good liability insurance policy?

[mcwagner]

Grannie got $10,000,000 for a cup of spilled coffee.

How's your million dollar umbrella going to look when little johnny slips and breaks his neck?

Let's see, you have how many rental houses, savings and other investments that are available to satisfy a judgement creditor?

[reihooked]

Since the original poster has not responded.  I am assuming he just registered to advertise the website.

[DeeinAustin]

He did. I deleted some of his posts. He claims he is asking how to form an LLC, but in other posts, talked about how often he forms LLCs using some service he's advertising for. We're on it.

[QBS]

Well,

Does anyone really hae a good source for forming LLC's ?

[DeeinAustin]

Yes. Just go online to your state's site and form them yourself or get with a lawyer. There may be some lawyers in your local REI club or recommended through them. I form them myself and just pay the online fees. You can search the internet for "start an LLC" and there are tons of companies who will charge you a fee for what you can do on your own.

[mcwagner]

don't pay an atty more than $200.

[SeattleCPA]

I still think LLCs are way, way overrated for real estate. An LLC costs money... those extra costs should be compared to what equivalent liability insurance costs. Liability insurance, even a $10,000,000 policy, may be cheaper than the costs.

Also, if you question your attorney carefully about the risks you avoid with an LLC, you'll find that the things you worry about most--say you do spill a hot cup of coffee--those things will still cause you to bear risk.

[mcwagner]

I have to disagree.  I have a client who has (had) 5 rental properties in his name.  He was the target of a lawsuit and lost.  Of his 5 properties, he lost two to satisfy the judgement, was prohibited from selling another at a nice profit because they were tied up in the lawsuit.  His atty fees ran up to $15,000.

If he had followed my advice and spent $2,000 for two or three LLCs and additional tax work to own these properties he may have avoided some of that.

No guarantees, but with no asset protection plan he had no chance.

[marcus335]

I had an attorney tell me it would be $1,800 plus filing fees.  That was pretty funny. 

[DeeinAustin]

I had an attorney tell me it would be $1,800 plus filing fees.  That was pretty funny. 

Did you laugh so hard that your sides hurt?

[Rich_in_CT]

I had an attorney tell me it would be $1,800 plus filing fees.  That was pretty funny. 

Did you laugh so hard that your sides hurt?

That's almost as bad as a guy quoting me $225/hr and $1500 qoute (6.66hrs of work) to do a slightly more complex than usual lease agreement.  Got the same done for $100. 

$1800 and it takes him what 20 mins to do that?  $90/min!?!?!

[SeattleCPA]

I just think your logic is very similar to saying that someone you heard about won the lottery so we should all play. Sorry.

A client of mine, one of the long-time, successful insurance agency owners in the town here I live, came into my office recently. We were working though some of the tax questions of him selling his business.

He was in a story-telling mood and mentioned that in the three decades he'd run his agency, he had never see a claim on an umbrella liability policy... and then he quickly pointed that that was why the policies were so cheap. The reason you can get a $1M policy for $150 a year is because claims rarely get filed.

So my point is the costs of the protection you get with a policy are pretty darn low.

And then my other point is that the costs of an LLC are not insignficant. In California, e.g., you still have the $800 minimum LLC franchise fee. That'll presumably be ruled unconstitutional by an appeals court in the next year or two... and then it'll go away. But there are other costs of using LLCs... you've got tax returns to prepare if the entity isn't disregarded... your borrowing costs are usually a bit higher.

I think the right way for any investor to analyze the LLC or not decision is to tally the costs of an LLC, tally the costs of liability policies, and then see how much that little extra bit of liability protection you get with an LLC costs you.

Sure, the math will differ for people. But some people are going to find the LLC thing uneconomical.