Do I really need to start an LLC for a real estate investing company from the start?

Question

I am trying to start a new real estate investing company in Illinois and am wondering what type of business entity to establish. This is a ground up company with myself as the sole proprietor. I intended to file a DBA but my CPA advised me to start an LLC instead. I have no assets and wouldn't have much of an operating capital to begin with. My thought is to start small with a DBA (sole proprietorship) and incorporate at a later date once I start to build capital. I think that it would make a bit more financial sense not to incorporate right away should the plans for the company not go as planned. I have made a few investments for the business (training courses, advertising, milage, etc.) which I assume I can write off as a sole proprietor. Any help would truly be appreciated. THANK YOU!!!

Answer 1

The LLC organization offers flow-through taxation so that you are only taxed once on corporate income.  It also offers limited liability and in most jurisdictions, an LLC is considered a separate legal entity apart from its owners.

LLC does not give you the level of protection of S-Corp organization, but requires much less paperwork and also carries the tax advantage mentioned above.

Answer 2

Listen to your CPA, they are suggesting a format, that offeres some protection, "in the event" that if something does "go wrong", you will have some protection against loosing some of your personal property, that could be attached with a lien, or, be seizied by a court, to cover your losses.   No insult intended, but your "self doubts" about your future success, showes in the way you ask your questions.   Yes, courses, advertising, milage, are expenses that can be deducted as a cost of business.  You CPA will ensure that those records will be documented as they do their job for you in keeping your records.    A "sole proprietorship" virtually provides no protection from the perils of a failed business.    Also, from the narritave you've provided, it sounds like you have very little experience in this field.    I salute anyone who has the guts to take on the world, and have their own business.    Fortunes are made by those who try.    But, you are heading toward a business, that is frought with problems at the present.    Real Estate Financing sources, will more likely work with an LLC, than with a Sole Propriator.   The initial costs of setting up a business like this either as a "S/P or an LLC", even if you have years of experience, is a very costly endevor.    Again, if you have the guts to go for it, good luck, work hard, and make a lot of money!   Like SPOCK on Star Trek would say..."Go forth and prosper..."    But, back to the real world.   As I suggested, your narrative indicated you have little real experience in this field.    My suggestion, is to get your Real Estate License, and work for a while for an established agency in your area.    Fine tune your knowledge about the real estate world.    As you go, pick and choose the propertys you personally are interested in, and on your own, "flip" them if thats your purpose, but keep your position with the experienced agency, until, you know for sure, that you are capable of going it on your own.   I say "more power to you"!

Answer 3

LLC only way to go to protect you and your family.

Not complicated or expensive.

Answer 4

Until the first person you deal with decides to sue you.

Don't be stupid. Business isn't a game.

You did the smartest thing possible and consulted a CPA and he gave you some pretty good advice and now you think you know more then a trained professional?

Time to get your resume ready son because you aren't going to be in business long doing that.