LLCs for Real Estate

Transcription

1 LLCs for Real Estate with Wendy Byford & Gary Bauer Your Entity Solution, LLC & Chrysalis Business Systems, LLC dba ebiz Learning Warren Taryle, CPA, MST Taryle & Associates, CPAs, PLLC

2 Agenda Why are entities important? How do I structure wholesaling? How do I structure flipping? How do I structure buy & hold? How do I use Series LLCs? Is a Checkbook IRA LLC worthwhile?

3 Why are entities important? Liability protection Tenant lawsuits Asset protection Lawsuits against you personally Taxes minimizing the tax hit Privacy Protection against targeting

4 What is wholesaling? You put a buyer and seller together and take a fee You may need a realtor s license if you are paid at the closing table You may be paid a fee by an investor for bird dogging You never take title to the property

5 Structuring Wholesaling Wholesaling generates earned income as a commission or fee Entity is an LLC Protection Flexibility - Self-employment tax - Income tax Tax election depends on the amount of money earned AFTER expenses Draw < $35,000 flow through

6 Structuring Wholesaling Wholesaling generates earned income as a commission or fee Entity is an LLC Tax election depends on the amount of money earned AFTER expenses > $35,000 subchapter S Paycheck - Payroll tax - Income tax Distribution to Owner - Income tax

7 What is Flipping? You buy a property and sell it again within 12 months You take title You transfer title IRS views this as any other business Views income as earned

8 Structuring Flipping? Just getting started - you are not sure whether or not you will like flipping - you do not know whether or not you will be able to resell properties - you do not know how much money you will earn in a year You need flexibility & protection

9 Structuring Flipping? You have some experience - you like flipping - you know you can resell properties - you believe you can make > $35,000 after expenses You need protection & tax minimization S LLC

10 Structuring Flipping? You are building a flipping business - you view flipping as your profession - you are flipping with partners - you are flipping in multiple states You need more protection & greater tax minimization C LLC / LP or LLC

11 You are building a flipping business Structuring Flipping? LIMITED PARTNERSHIP C LLC General Partner Limited Partners Partners States

12 What are buy and hold? You buy & hold property > 12 months You take title and hold it Comes in many flavors Rental Rent with option to buy / lease option Wrap around mortgage Land banking

13 Structure Buy & Hold Basics Liability Protection Put property into a flow through LLC in the state where the property is located Put property into existing LLC if desired do foreign registration if needed Business license Lawsuit

14 Structure Buy & Hold Basics Liability Protection Limit the number of properties per LLC Equity at risk Number of possible lawsuits Set up separate LLCs based on location partners risk

15 Structuring for Buy & Hold Basics - Asset Protection LLC state single member vs. multimember LLC vs. LP layering trusts & LLCs & LPs

16 Structuring for Buy & Hold Layering for Asset Protection Real Estate Privacy Trust LLC FAMILY LIMITED PARTNERSHIP GENERAL PARTNER LLC LIMITED PARTNERS

17 What is a Series LLC A business entity that may establish one or more series with separate members, managers, membership interests and assets Cell 1 - Mary Smith 21%, John Jones 79% - flips properties in Indiana Cell2 - Mary Smith 55%, Sally Smith 45% - owns a duplex in Las Vegas Cell 3 - John Jones 12%, Sam Smith 25%, Janice Jenkins 63% - owns an apartment building in Tennessee Series LLC C e l l 1 C e l l 2 C e l l 3

18 Foreign Registration Foreign Registration is a request to do business in another state using your Series LLC Considerations: Does the foreign state recognize Series LLCs? Will the foreign state register a single cell? Does the foreign state require an LLC to be registered in that state to defend a lawsuit? Is a business license required?

19 What is a Checkbook IRA LLC? An Entity wholly owned by your self directed IRA is funded by your Custodian from your IRA account gives you checkbook control over your IRA funds can help minimize fees and time delays requires that you understand the rules prohibited transactions disqualified parties & self-dealing UBIT must send valuation report to Custodian annually

20 Your Entity Solution, LLC Wendy Byford, Manager & President Gary Bauer, Vice-President Taryle & Associates, CPAs, PLLC Warren Taryle, CPA