Start A LLC
Doing business as an individual exposes one’s personal assets such as houses, cars, bank accounts to unnecessary risk, including litigation. Either caught unaware of these risks or so penny wise they’re dollar foolish, many a would be successful entrepreneurs dreams are broken by the oversight.
Who was it that said, “There’s got to be a better way”? Well, there is…
Do business as a business entity and you get to insert a layer of protection, call it a shield against the inherent risks of operating in a litigious society. To a large extent, that business entity then becomes the target of creditors, clients and/or others with legitimate claims against it and its business operations, not you and your yacht. And the great news is that many states offer a self-serve method of forming a business entity for nominal filing fees. As of this writing, $50 and about 15 minutes of your time at the Colorado Secretary of State’s office (online) will have you in business with your own LLC, printed Articles of Organization and all! You’ll find a directory of other states with secretaries of state services online here. However, there is more to operating a company than its formation and you might want to consider more comprehensive options including legal counsel to make sure its operations are sound.
There are many benefits to doing business as a LLC, such as simplicity. No shareholders and other corporate formalities, just you and your partner/members doing what y’all do. The tax benefits include it being a pass-through entity, meaning the business profits are not taxed directly. Instead, distributions are reported by its owners/members on their respective personal returns only to be unceremoniously taxed. And of course, there is that layer of asset protection previously discussed.
Using LLCs as investment vehicles
So here’s the cool part. Know we’re just a little…OK a lot biased towards real estate. And though we digress as that is not the cool part we’re talking about, don’t you think it made a great segue to the outstandingly stylish an investment vehicle the LLC makes for it? That you’ll soon see but, first consider this.
You’re going about your business, of real estate that is, when you come across this underwater house at 123 Sunken St. Not so surprisingly caught in its undercurrent, either its (hopefully) extremely distressed owners have or are in the process of frantically trying to swim away from it, alternately (hopefully not literally) drowning in it, or both and you can have it for a song…
…happens all the time.
What to do?! First, a little…OK a lot of due diligence and then we pen a subject-to deal leaning towards the conservative side of your findings, that’s what! This is it how it looks…
…”Well, Mr. & Mrs. Sellers, here’s a check from Mr. Investor’s account for this underwater asset with who knows what barnacles attached to it. Have a nice life!”
Right? Uh, wrong! Make that check from 123 Sunken St LLC’s account, thank you very much. This way, it is the business entity which you and your members/partners, etc make your livings from, reaping in its profits and/or yes, absorbing its liabilities. Don’t be silly, looking all surprised; of course they exist! But at least this way you have a little…OK a lot of CYA going on in the form of an extremely handy shield between “they” and your ass-ets.
Fueling that investment vehicle
Oh, yes. Now the fun part. Just how do we fill that shiny, new real estate LLC with the fuel it needs to make it to its destination anyway? Well, there are always life savings and/or AKA home equity loan. No? We can always beg Uncle Tom and them to buy into the dream…again…maybe not. Well, there’s always that hard money and private money and…
Ooh! Ooh! What about business credit?!
Yes, business credit! You might be wondering, “How in the world will I get, much less use business credit to invest in real estate?”
With an LLC’s Articles of Organization (or other business entity) in hand…
Just like that. Any questions?
Of course. It’s either this:
Oh! And our vendor gets 8%, only when their smart work is done, while you get the credit you deserve to do what you will – except it’s like cash.
That’s it! How we roll, in pictures.
Hit us up using the contact form to the right with any more questions or to get started. We’ll come running.
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