Joe Holmes explains whether you need an LLC for real estate wholesaling or flipping. He covers liability protection, tax treatment options, and recommends using separate LLCs per property for asset protection. Consult a CPA or attorney before deciding.
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Do you need an LLC when flipping or wholesaling properties? Find out coming up next. Setting up an LLC to wholesale or flip real estate is one of the easiest ways to protect your personal asset. But is it necessary? Really quick before we start, I just want to introduce myself to all the new members. I'm Joe Holmes. I have over 40 years of experience as a broker, mentor, Make sure that you like this video and you subscribe so that you never miss anything. An LLC is not a requirement to be successful at wholesaling or flipping, but it may be a smart business decision as an LLC offers protective financial and legal benefits to its owners. Let's discuss a couple of benefits of having an LLC. I'm not a tax advisor or an attorney, So you need to do your own research. 2 benefits I want to talk about. Limited liability protection. So think of it this way, an LLC is actually an entity or a person, and you're going to open up a bank account, you're going to deal everything through that bank account into the LLC, you're going to purchase properties. So your liability is limited to that property and what's in your bank account. They— if something goes wrong and they want to sue, they're going to sue that LLC. They're not going to go out and try to sue you personally, even though they probably will. But if ever you've done everything correctly, they're only going to be able to go to the assets in the bank account of that LLC. Number 2 is LLC taxation. Now, this really depends on what kind of LLC you get. You can get an S corp, you can get a corporation. Both are taxed differently. If you're going to do buy and holds, then just a simple LLC is sufficient. If you're going to do a flipping business like we're talking about today, then you would want to get an LLC with an S corp designation, which means different things. And check with your accountant to see exactly what he tells you. And then You could always form a corporation, and a corporation is taxed differently than the 2 I've just talked about. And finally, what do I use? I use a couple of instruments. I use a land trust to begin with that gives me a lot of privacy, but it doesn't give me asset protection. And the way I get the asset protection is the beneficiary of that land trust is my LLC. If they sue the land trust, then they get to the beneficiary, then they find out that the beneficiary is actually my LLC, and then that's what protects me at the end of the day. I do have a different land trust for each property, and I do have a different LLC for each property. You don't want to be combining all these LLCs and properties into one LLC Because remember, again, if they penetrate that, you know, LLC, anything that's in there, they're going to go after. So if you have 5 properties and millions of dollars in the bank account under that LLC, they can go after all that stuff. So if you separate it out, and I know it's a lot of work, and if you're flipping a lot of properties, yes, there's a lot of things that you have to do to protect yourself at the end of the day. Check with your CPA, check with your accountant, and definitely check with a lawyer. While it is a good idea to form an LLC to protect yourself, don't let this hold you back from starting down your real estate journey. If you're new to investing and want to know more about wholesaling, click on this video right here. As always, feel free to reach out. I'm here to help.
