There is so much conversation on LLCs. From the basic stuff like what are they and why should we use them to the more complex like which state should we register in and the difference between a Manager Managed LLC versus a Member-Managed.
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Today I am going to take a stab at one of the questions that goes around a lot. Should you get a new LLC every time you buy a property? There are pros and cons for doing this and in today’s video I go over them in detail. In short form, here are some highlights:
Pros of using a new LLC every deal:
1. Ownership structure – perhaps you are working with several different owners on a new deal. It makes sense to have a new LLC as it will define the ownership percentages and the roles of each owner.
2. You are working in a new state – this could be argued either way but to me it makes sense to incorporate in the state where your investment property is.
3. You are doing a flip – many investors do a new LLC every flip. This makes sense as it separates that flip from other properties with respect to taxes and liability. More on this in the video.
4. Asset protection – holding each purchase in it’s own LLC will compartmentalize each property from the other. If there is a liability claim with one property it won’t affect any others held by you. Some would say that this is the main reason to hold each deal individually. Watch the video for a deeper conversation on how valid this is.
As always, please email us any real estate questions to [email protected] and we will answer them on an upcoming episode!
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