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Welcome back to another Rookie Reply! Each week, our inbox is flooded with questions about LLCs, so we’re dedicating an entire episode to the topic! Tune in as Ashley and Tony share their own experiences with LLCs, their benefits, and issues you might encounter. You’ll learn about the requirements for LLCs, when to put multiple properties under one LLC, how to apply for bank financing, and how to take advantage of business credit cards!

My name is Ashley Kehr and I’m here with my co-host, Tony J. Robinson.

And welcome to the Real Estate Rookie podcast where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And today, we’re talking about liability, we’re talking about lawsuits, we’re talking about how to protect yourself as a real estate investor in all things LLCs.

One of the biggest questions that are asked on the BiggerPockets forums, that are asked in the Real Estate Rookie Facebook group, that is asked on the Rookie at YouTube channel that is submitted to biggerpockets.com/reply is, do I need an LLC? So, this can be because you are starting a business, you are buying a rental property, or maybe you already have property and wondering if you’re not going to be living there as your primary residence, if you need to transfer it into an LLC. Today, we are going to break down all of the elements and all of the questions you should be asking yourself if you are going to consider opening an LLC and if it’s worth it for you or not.

Yeah. We’re going to answer questions like, do you need to have your LLC set up before you submit your offer? What does financing look like for your LLCs? How many should you have? So, all things LLCs about investing in real estate. Now, I just want to preface this episode by saying that neither Ashley nor I are attorneys, so don’t take this as legal advice. I think still go talk to someone that knows your state, that knows your local laws, they can help you get set up correctly. But we’re just going to talk at a 30,000-foot level, some general principles about LLCs and how they apply to you as a real estate investor.

And I know you guys can’t stand it when we say this, but this is going to be one of those questions where it depends on your own situation, but we are going to help you figure it out if an LLC is right for you or not.

Now, I want to give a quick shout out to someone by the username of Casey Intero. Casey left us a five-star review on Apple Podcast and said, “I can’t express how much I adore this podcast. As a seasoned real estate agent and investor, I find myself learning something new every single week. My husband and I eagerly dive into discussions about each episode. The authenticity and down to earth nature of your guests truly resonates with me. Thank you guys so much.” So, if you guys haven’t yet… guys, 60 seconds, two minutes max for you to go on to Apple Podcast, YouTube, wherever you’re listening, take a few minutes, write that review. It really does help us reach more folks. And when we reach people, we tend to help them, which is what we’re all about here at the Rookie Podcast.

So, one of the things we’re going to talk about are different factors to consider when determining if you need an LLC. The first thing I’m going to say is if your attorney or even your CPA recommends that you have an LLC, then yes, you should probably do it. There are different costs that are associated with having an LLC, and I think that is one of the first determining factors. Is it cost-effective for you to have an LLC? Because one of the issues that comes up along with should I have an LLC or should I not is should I have an LLC for each property? And that is a whole another question upon itself. But Tony, let’s do a little comparison here, talking about costs. But in New York State to file an LLC, it is $200. And what is it in California?

California, if I’m not mistaken, it’s $800 per LLC.

And then, there’re also fees that can accumulate every single year. You have to pay another… for mine, its $25 a year. Do you know what it is for yours, Tony, for California?

So, that’s just one of the things to consider, but we’re also going to talk about your net worth and why are you considering an LLC because you want that liability protection? Well, very, very sorry to say, but if you have no net worth, you have no assets, when somebody sues you, you have nothing that they can take. So, maybe you’re renting an apartment, you have no savings, you don’t have a car and you ride your bike, you are in great position to maybe not even need an LLC, and go ahead, and take that risk of getting sued. But we’re going to talk about these different scenarios, things like that, which will impact if you have a lot of money sitting in your bank account, and somebody sues you, an attorney is going to be more likely to want to take this other person’s case because they see that you have this high net worth, and you have these assets that are able to take instead of somebody who has nothing. And if you try and sue them, they’re not really going to get anything if they don’t have anything to take. The next thing we’ll talk about, partnering, is if you have a partner for an LLC, you need to think about opening up yourself to liability by partnering with somebody. So, if you have that LLC, you have your company, you have your structure, and you can also do a joint venture agreement too. What we don’t like to recommend is that you go into a property-owning it with somebody that is in both of your personal names and there is no contract or an agreement put in place. And sometimes having that LLC and then definitely that joint venture agreement can really help with that. But the joint venture agreement is a whole another episode. And maybe, Tony, we need to have you do a full episode on that because I’ve done more LLCs and Tony has done more joint venture agreements. So, you can listen to this episode, learn all about LLCs, and then we’ll do another one, and we’ll learn all about joint venture agreements, and then you guys can compare, and maybe see one of those are better than actually owning the property in your personal name if you are partnering with someone. But you can also check out the book, “Real Estate Partnerships,” too. So, you’re buying this property with somebody, you can check out Real Estate Partnerships by myself and Tony Robinson. And you can find that on Amazon or the Bigger Pockets bookstore. Okay. So, I want to let you know that if you do decide to go with an LLC, it’s not just a matter of opening up the LLC, and you are protected, nobody can sue you, yay. There are rules that you have to follow so that you do not pierce that corporate veil. So, what we’re talking about here is, for example, know what your state laws and regulations are for having an LLC. So, do you have to have a meeting every year that you have to document that you had your meeting minutes documented? Do you have to file a biennial statement? There’s actually a new law coming out too in January 2024 that is for your LLC, where you have to…

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