LLC or Corporation & Due on Sale Clause - Posted by Erskine

Posted by Rob FL on January 26, 1999 at 17:30:23:

The costs very much depend on your state. For example in FL you can set up a corporation for roughly $150 in filing fees and $150 or so annual fees, whereas an LLC costs nearly $350 to file and $300 or so annual fees.

Also creditors of an owner of a corporation can seize that owner’s stock and thereby become an owner in the corporation, whereas in an LLC they are limited to a charging order against the distributions to the owner but cannot actually seize his interest in the LLC and therefore cannot actually own the LLC. An extremely big difference.

LLC or Corporation & Due on Sale Clause - Posted by Erskine

Posted by Erskine on January 25, 1999 at 20:14:01:

I need to get some advice as to whether or not an LLC or a corporation is better liabability protection. Secondly, if a property is changed from a named individual owner to either a LLC or corporation will it activate the due on sale clause? How best to avoid this problem?

Re: LLC or Corporation & Due on Sale Clause - Posted by Tim (Atlanta)

Posted by Tim (Atlanta) on January 26, 1999 at 10:40:51:

The LLC will offer better liability protection, that’s why they call it a Limited Liability Corporation. If you want to avoid the due on sale clause, I recommend that you read the articles by Bill Bronchik on avoiding the DOS. Also there are several excellent posts lately by Bill Gatten on setting up land trusts to avoid the DOS.

Re: LLC or Corporation & Due on Sale Clause - Posted by John(NH)

Posted by John(NH) on January 26, 1999 at 10:31:44:

From what I understand from Bill Bronchick, LLCs are better for passive investments (rental properties) and Corps are better for active investments (flipping).

Quitclaiming interest from yourself into an LLC or Corp will violate the due on sale caluse. Whether the mortgage owner activates the clause is unknown. However, quitclaiming interest into a land trust will not violate the due on sale clause, and you can make the beneficiary of the trust your LLC or Corp. I strongly suggest purchasing a course like Bronchicks as it explains a lot.

??? - Posted by MichaelR (NoVA)

Posted by MichaelR (NoVA) on January 26, 1999 at 10:50:51:

I’m curious to know what superior liability protection an LLC provides that a Corporation does not?

To my understanding that characterization is incorrect, and that they are the same with the exception that the LLC is not as tested in court.

Michael

Re: Property Vs. Other Investment??? - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 15, 2002 at 20:48:01:

Stacy–(AZ)---------------

" I’ll bet you would have paid $3 million for your $1 million over that time period in monthly payments and maintenance."

But his renters will be the ones to pay for it.

Good InvestingRon Starr**

Re: ??? - Posted by Tim (Atlanta)

Posted by Tim (Atlanta) on January 26, 1999 at 14:16:10:

I am far from an expert in the subject.

Yes, I believe you are right, corporations and LLCs are roughly equivalent when it comes to limiting personal liability. What I should have said was that the LLCs are cheaper to set up and to maintain. You do not have to file federal tax forms for the LLCs, and you do not have to take any income (as you might for an S-Corp) which is subject to the self-employment tax.

Just seems to me it would be cheaper in time and money to set up the LLC.

Re: Property Vs. Other Investment??? - Posted by Stacy (AZ)

Posted by Stacy (AZ) on July 15, 2002 at 21:10:43:

Yes, of course. I was a little too brief. It’s a time value of money post, not meant to be discouraging. Sometimes it seems like magic…wait 30 years and be rich. I just wanted to point out the other side.

Anyway, I understand your reply.