Tax question

[yveskleinsky]

I have heard before that the best way to protect assets is to form some sort of business entity. I will be buying either multifamilies or commercial office buildings (or both) in the near future. Should I form an LLC now and just keep it handy for when I do move forward? How do you guys form you entities and when? ...I am also married and my husband wants no part of what I am doing (sigh) and I want to give him peace of mind. Can I form an LLC with just me and would that protect him?

 

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[kurtyordy]

I use legalzoom for my entities, but my personal belief is that they are not neccessary until you have 20+ units. Smaller than that and a good umbrella policy will cover you.

 

[EasyMoney_in_NC]

I am in the process of working out your question's issues right now. And after plenty of money to attorneys, here's what my education has afforded me (your state may be different). Owning as husband and wife is the safest. Unless you can buy (incl. financing) in your own name, as soon as you move from tenants in common (H&W) to owned as an entity, you MUST give up one or the other of - either ownership (own a very small 1% of the investment as so not to jeopardize equity under lawsuit, but control it all) or control (majority share holder but have no control over day to day opps). Plus you are adding to your paperwork load, extra tax forms (and costs if you get charge by CPA per the form), and multiple bank accounts (no co-mingling between properties incomes/expenses).

What I think ends up being the best scenario, as much as I hate to do it (I have no trust in it) is to over insure everything and follow all the common sense rules, ie: make sure properties don't have lawsuit type structural or functional issues, put all agreements on paper for a trail etc.....

And the final problem is that again, as an LLC, LP or other entity, you won't find financing easy at all. If you do find it, the rates will be horrible as will the rest of the terms.....and you'll still have to personally guarantee it, so a good attorney may get you there. Own it easy, leverage it high (no one will sue you for your debit!) and enjoy using the money. I swear all this corporate entity crap is a way for attorneys to make easy money and to see who can make things the most difficult and to see who is smart enough to break through their barriers.

But please do your research, your area may be different and I'm not an attorney.........nor do I play one on TV.........nor did I just save money by switching to Geico