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Current LLC conflicts w future real estate investment?

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Pipan

Active Member
What is the name of your state? TX

Hi All

I formed an LLC 2 years ago for Marketing business, but the company has not had any revenue since then.
Now, I am thinking about buying a rental real estate for investment, and I want to do it under an LLC. The real estate will have nothing to do with the marketing business. I was wondering if I can purchase a real estate property with my current LLC, or I have to form a new one specifically registered for real estate purpose?

Thank you.
Pipan
 


Taxing Matters

Overtaxed Member
The real estate will have nothing to do with the marketing business.
If that is what you want then you do NOT want the LLC that does the marketing to buy or otherwise own the real estate. Form a second LLC for the real estate activity if you want to keep them separate.
 

adjusterjack

Senior Member
Here we go again.

I was wondering if I can purchase a real estate property with my current LLC, or I have to form a new one specifically registered for real estate purpose?
Why do you think you need an LLC to purchase real estate?
 

PayrollHRGuy

Senior Member
@Pipan Are you ever going to use the LLC again for the marketing business?

When you completed Form 205 what, if anything, did you put in the "Supplemental Provisions/Information" field of the form?
 

quincy

Senior Member
What is the name of your state? TX

Hi All

I formed an LLC 2 years ago for Marketing business, but the company has not had any revenue since then.
Now, I am thinking about buying a rental real estate for investment, and I want to do it under an LLC. The real estate will have nothing to do with the marketing business. I was wondering if I can purchase a real estate property with my current LLC, or I have to form a new one specifically registered for real estate purpose?

Thank you.
Pipan
You would be smart to discuss the pros and cons of each of the following with a business law and/or tax attorney in your area but here are some options available to consider:

You can use your current marketing LLC and operate new businesses under the LLC by creating DBAs (doing business as). For example, you have Pipan Marketing and Pipan Marketing doing business as Pipan Real Estate. The advantage to having a single LLC with one or more DBAs is that you only need one EIN and one tax filing even though you will run the companies separately. The major con to this (and it can be a BIG one) is that your LLC and DBAs are considered one entity and the assets of each are at risk if one of them is sued.

You can also form several different LLCs, so you can have one for your marketing and one for your real estate. When kept completely separate, if one business is sued, the assets of the other are not at risk. But you need EINs for each and articles of organization for each and separate bank accounts and records.

Another option is to create an LLC holding company for each of your businesses. Example: Pipan LLC as parent company for Pipan Marketing and Pipan Real Estate. Assets of one business will not be affected by a lawsuit filed against another business.

Again, you are best off discussing your plans with a professional in your area.
 

Taxing Matters

Overtaxed Member
But you need EINs for each...
Not necessarily the case. Pipan might not need an EIN at all. A EIN is only required for a single member LLC if the business needs to file federal tax returns for the business, e.g. employment related returns when the business has employees, returns for certain pension plan arrangements, excise tax returns, etc. The income from the business would be included on Pipan's individual income tax return so no EIN is needed for income tax. (other than the individual income tax return that Pipan would file and articles of organization for each and separate bank accounts and records. While it might be useful to have a EIN for banking or other purposes it is strictly speaking not required for those purposes.

Again, you are best off discussing your plans with a professional in your area.
I agree that discussing it with a business attorney and a tax attorney or other tax professional would be a very good idea.
 

quincy

Senior Member
Thanks. I was briefly outlining a few possible drawbacks to the various options I mentioned.

Pipan has mentioned in other threads some businesses he has formed or has considered forming. One had a possible two-state location, one had a possible partner ...

I think sitting down with a business law professional in his area for a discussion of his business ideas and how best to structure his businesses is probably the smartest thing for Pipan to do.
 

zddoodah

Active Member
I was wondering if I can purchase a real estate property with my current LLC, or I have to form a new one specifically registered for real estate purpose?
I'm not sure what you mean by "specifically registered for real estate purpose." Unless the operating agreement for your current LLC expressly limits the company's business operations to marketing activities (and if you don't want to amend the operating agreement to allow for other activities), there's no legal prohibition against the LLC buying real estate.

I strongly urge you to consult with a local attorney about this.
 

Pipan

Active Member
@Pipan Are you ever going to use the LLC again for the marketing business?

When you completed Form 205 what, if anything, did you put in the "Supplemental Provisions/Information" field of the form?
I think when I was requesting EIN online on IRS website, I was asked about the type of the activity, where I put Marketing. I am not sure 100% though.
 

PayrollHRGuy

Senior Member
I think when I was requesting EIN online on IRS website, I was asked about the type of the activity, where I put Marketing. I am not sure 100% though.
I doubt that would matter. What you put on the Form 205 with the TX Secretary of State might. Is there some reason you didn't answer the first question I asked?
 

Pipan

Active Member
You would be smart to discuss the pros and cons of each of the following with a business law and/or tax attorney in your area but here are some options available to consider:

You can use your current marketing LLC and operate new businesses under the LLC by creating DBAs (doing business as). For example, you have Pipan Marketing and Pipan Marketing doing business as Pipan Real Estate. The advantage to having a single LLC with one or more DBAs is that you only need one EIN and one tax filing even though you will run the companies separately. The major con to this (and it can be a BIG one) is that your LLC and DBAs are considered one entity and the assets of each are at risk if one of them is sued.

You can also form several different LLCs, so you can have one for your marketing and one for your real estate. When kept completely separate, if one business is sued, the assets of the other are not at risk. But you need EINs for each and articles of organization for each and separate bank accounts and records.

Another option is to create an LLC holding company for each of your businesses. Example: Pipan LLC as parent company for Pipan Marketing and Pipan Real Estate. Assets of one business will not be affected by a lawsuit filed against another business.

Again, you are best off discussing your plans with a professional in your area.
Quincy

Thanks for explaining three different routes to go. If I want to go with DBA option, how are typically registration/formation paperwork and fees compared to a new LLC?
 

quincy

Senior Member
Pipan, what is your reason for wanting an LLC in the first place?

You can often save money and time by adding DBAs to an existing LLC.
 

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