Question by Dave: Should I start my real estate investment company as an LLC?
I have investors willing to invest in my real estate company where I would deliver in return a 10% ROI / Yr on a promissory note renewable every 12 months.
Should I set things up as an LLC?
What kind of tax liability does the LLC have if it is to recieve funds from investors used in purchasing real estate?
Best answer:
Answer by Lana
Don’t know what state you plan to set up shop in, but you should check out the Secretary of State’s website. There are different types of LLCs with different liabilities, and can be similar to a corporation.
What do you think? Answer below!
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Tags: company, Estate, Investment, Real, should, start
Yes, setting up an LLC is cheap and relatively easy. It allows you to share income with your partners, and/or hire employees. It also allows people to invest in your company. It can also help shield you from bankruptcy and lawsuits.
The LLC itself will have to file a tax return each year, but it won’t have to pay taxes as long as it distributes most or all of its income to its owners and partners. The taxes are passed down to the individuals who receive the profit.
I would like to point out that no entity (LLC, Corporation, etc) will protect you from fraud, negligence, etc. It will protect your personal assets for normal business liability.
Also, you cannot change it’s type once you’ve formed it. And, as a “diregarded” entity (it isn’t recognized and does not have a tax return) you will have to elect how it will file it’s returns – as a corporation (1120/1120S), partnership (1065) or trust (1041). Again, once you’ve made this election it cannot be changed.