LawProblems.com -- Answers to Questions About Real Estate Law
Money and real estate news you can use everyday
 
           

Home
Real Estate Lawyer
Question of the Week
Tip of the Week
Recommended Books
Resources
Glossary
Contact Sam

Setting Up Real Estate Business as LLC

Ask the Real Estate Lawyer: Real Estate Law Q&A

REM # LAW 670

By Ilyce R. Glink and Samuel J. Tamkin

Summary: Thinking about buying and flipping low-end housing for a profit? Ilyce and Sam explain how to set up a business to protect you and any partners you wish to include.

Q: A few business partners and I are considering starting a limited liability company to purchase lower-end housing.
(article continues below useful links)

We would invest a few thousand dollars to update and then resell these homes at a profit.

What is the best way to research how to set up this company?

A: There are several vehicles you can use to start a business. One of them is to do business in your own name and the names of your business partners. Most people would not recommend that you do it that way.

The second is to set up a limited partnership, corporation or limited liability company. For real estate purposes, most people agree that a limited liability companies gives its organizers the most flexibility in terms of structure and for income tax purposes.

Whether you chose a limited partnership, corporation or limited liability company (LLC), your aim is to have a vehicle that will insulate you in case problems develop with your venture. These problems can involve litigation with third parties or even creditor problems. In each case, the entity you choose should shield you from creditor’s claims should something happen.

An LLC shields its members from claims from creditors and litigation matters. The LLC also permits the tax benefits of the LLC to flow directly to its members.

If you take a large corporation, corporation’s income is generally taxed and its distributions to its shareholders are also taxed as dividends when the shareholder receives them. While there is another type of classification for federal income tax purposes for small corporations, this other classification does not afford owners the flexibility of an LLC.

To form an LLC, you should consult with an attorney who specializes in forming companies or you can do it yourself with some of the do-it-yourself kits that are available over the Internet.

But whatever you do, make sure the organizational documents you have contain provisions to help you and your partners sort out the many issues that can arise with the co-ownership of the company, including breakups, decisions that can’t be made, death of a member, bankruptcy of a member, divorce, and sale of an interest in the LLC.

If you don’t have these provisions in your documents, you may find yourself in a situation that could have been prevented but later causes greater harm because no one is willing to work with you to solve the problem and you don’t have a document to help sort out the mess.

Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com

 

 

 

RSS Feeds

RSS 0.91 Feed
RSS 1.0 Feed
RSS 2.0 Feed
ATOM Feed

Home Buying   Using Attorneys to Buy a Home - Earnest Money - Quitclaim Deeds - Easements - Seller Misreprensation - New Construction - Buying with Partners - Home Inspections - Seller Problems - Agent Issues
Home Selling    Using Attorneys to Sell a Home - Seller Disclosure laws - Title Problems - Buyer Problems - Real Estate Agent Issues - Tax Considerations
Home Ownership   Neighbor Problems - Seller Misrepresentation And Fraud Issues - Problems In a Condominium Development - Problems Around The House - New Construction Issues - Subdividing Land
Home Renovation   Architect Issues - Contractor Issues - Problems With Contractors - Inspection Issues - Certificate Of Occupancy - Municipal Inspections - Punch List Issues - Financing Issues - Installment Contracts
Real Estate  
Financing
 
Loan Application Problems - Refinancing Issues - Paying Off An Old Loan - Credit Problems - Seller Recommended Lender - Prepaying A Loan - Prepayment Penalties - Predatory Lenders
Investment  
Property
 
1031 Exchanges - Financing Investment Properties - Landlord and Tenant Issues - Partnership and Company Considerations - Tax Considerations - Subdividing Land
 
Contact Us | Sitemap | Terms of Use | Copyright ©2001-2005. ThinkGlink Inc. All rights reserved.
Reproduction of material from any www.LawProblems.com pages without written permission is strictly prohibited.
Site design by Walker Sands Communications