LLC - Do You Need One (or Multiple) Now or Later?
Do you need an LLC now or after your first deal? Do you need multiple LLCs?
Let’s start with a disclaimer. The following information is provided for informational purposes only. The JV Wholesaling Matchmaker by D Walt Holdings LLC is not engaged in rendering legal or tax advice, and this information is not a substitute for the advice of an attorney. If you require legal advice, you should seek the services of an attorney.
Now let’s get to it.
In real estate investing, these questions come up a lot! Despite what anyone tells you, you need an LLC before signing any contracts with sellers or buyers.
Why? Well, if you sign a contract before creating an LLC, you will be personally liable for any lawsuits that come from that deal FOREVER. Getting an LLC later won’t help you. The deal is done, and you are unprotected. This means you could lose your assets like your house, car, savings, etc. Which could impact all your future deals.
In most states, LLCs are easy and cheap to set up. So, don’t make the mistake of exposing yourself to this sort of liability. It just isn’t worth it.
So now that you understand that you need an LLC...
How many do you need?
Well that depends. If you are buying property and holding it as a rental, you will need multiple LLCs.
Here’s how that breaks down.
You need an LLC for your business. That’s for your company that does the deals. That LLC is created with the state. You are a member of that LLC and can sign contracts and do deals in the name of that LLC.
Then you need a second LLC (or more depending on how many properties you own for rentals) that hold the property itself. That will protect your personal assets from any liability that arises from lawsuits by your tenants.
Now, you can put multiple properties in the second LLC which will still protect your personal property, but the problem with that is that all the properties that are in one LLC will not be protected from each other. So, it’s a good idea to start separating the rentals into 3 or 4 properties per LLC, once you start accumulating several rentals.
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