Y'all Disagree with Bronchick? - Posted by Ian

Posted by Ian on September 20, 2004 at 09:09:26:

Brian,

I appreciate you taking the time to respond to my post on the discussion board. Although you offered advice similar to many others’, it seems it was offered in a slightly more humble manner. I would like to speak with you some time regarding recommendations and what aspect of real estate investing you’re involved with. Hopefully we’ll be able to work together and build a mutually beneficial relationship. I look forward to hearing from you soon.

-Ian

Y’all Disagree with Bronchick? - Posted by Ian

Posted by Ian on September 19, 2004 at 17:30:47:

A few weeks back I posted a request for recommendations of attorneys and CPAs in the Chicago area. I want to set up either an LLC or an S-Corp and get tax planning advice before I do my first deal. Not only do I think this is prudent but it’s also how Bronchick recommends everyone, even newbie flippers such as myself, start out. Now, when I posted the request the only responses I got were from people saying that I shouldn’t worry about those administrative type things right now, rather, I should focus on getting my first deal done. That advice is probably pertinent if I was still in the analysis paralysis stage, but I got over that a while ago. I am going to do my first deal, but I will not do it without planning and protection.

Now, I have two questions following that long discourse. What are everybody’s thoughts about the advice I mentioned - just doing the first deal without any kind of legal or tax planning? Secondly, is there anybody on the board willing to offer recommendations of attorneys and CPAs in the Chicago area for a newbie flipper?

I look forward to your responses.

–Ian

This is your answer - Posted by E.Eka

Posted by E.Eka on September 20, 2004 at 12:52:51:

The main reason it doesn’t matter is from a tax planning perspective, you’ll pay the same taxes as an LLC, S-Corp or sole proprietership. LLC and S-corps don’t pay taxes. They are pass through entities. You record activity on their 1120-s or 1065s and then the k-1’s are included on your 1040. The main reason Bronchick says set up an LLC is for liability protection and not necessarily tax planning.
The point of “forget about the administrative stuff first” is people often get to entangled with “setting” things up and not focusing on a deal. So they spend tons of money and time, setting up their company, but have yet to generate business. Once you’ve had a deal or two, set up your accounting process.

Re: Y’all Disagree with Bronchick? - Posted by Kristine-CA

Posted by Kristine-CA on September 20, 2004 at 10:24:59:

All advice is biased. Bronchick has good advice–advice for which there is product to sell. So take his suggestions for what they are worth. I strongly suggest doing a deal to see if this business is even something you will really like doing before setting up infrastructures. We just got our corp registered this past week. After 20+ deals.

I would guess that the number of people that buy printed stationery and set up corps is 2 or 3 times greater than those that actually stay in business.

Do you have so much to lose? Usually those with lots of assets already have these types of entities in place. What about spending your time and money on getting the deal this first time around? Kristine

Re: Y’all Disagree with Bronchick? - Posted by Rob FL

Posted by Rob FL on September 20, 2004 at 08:29:14:

If you have substantial assets and income that could be taken by some creditor, then it might be a good idea to form a new company before doing a deal. Otherwise it is probably best to just find a deal first and then worry about forming a company down the road once you see if this business is for you.

Like others have said, the ratio of newbies who actually end up doing a successful deal is low. Most don’t even do the first 1. Even fewer do the second.

I’d rather see you spend the $500+ that you would use to form a company and use that money on advertising your business.

Re: Y’all Disagree with Bronchick? - Posted by Brian W(IL)

Posted by Brian W(IL) on September 19, 2004 at 22:07:19:

Ian, I’m also from Chicago. I’ve actually read one of your previous posts, stating that you are a newbie and you are looking to start wholesaling to rehabbers. We need to talk. I’m a rehabber and am looking to network with people like you. I’ve got your number from your post and will give you a call this week. Also to answer your question regarding having a CPA and attorney. It’s always good to have both on your team at some point and time. When you put them on your team is really up to you, in my opinion. If you are just starting out and don’t have much of an idea about what you are doing, you’ll probably want to obtain an attorney first and when you start to make money consistently, that is when you should seek the advice and support of a CPA. Just my 2 cents. I’ve actually got a good attorney and CPA on my team and would be grateful to give you there contact info. Your location matters if you want to use them and if not, I’ve got several others that I could give you also. Take care.

Not Really - Posted by gwtx

Posted by gwtx on September 19, 2004 at 21:50:51:

Hi Ian,

There is not really anything wrong in trying to be “prudent” as you say.

Maybe the best place to find a cpa, re attorney, title company, insurance company and anyone else you would think to have on your team is:

your local Real Estate Club located at:

I’m sure that you will be able to network w/ the locals there and get plenty of leads for your team.

Hope this helps

gary

Da Bears still suck! - Posted by Dave D (WI)

Posted by Dave D (WI) on September 19, 2004 at 21:07:55:

Sheesh, I must be in a charitable mood… being that I’m actually giving a FIB advise on RE! OK, the Packers must have mailed this game in, not thinking they actually needed to show up at Lambeau Field (or Lambert Field… if you would be John Kerry, but I digress.)

If you ran the numbers, those who wanna do a deal vs. those who actually get off their duff and in fact accomplish a deal are probably 98:1.

Face it: If you want to first cover your butt seven ways from Sunday, you will most likely belong to the wanna-be group. An attorney will gladly take your dough forever and you still won’t do a deal (But you will be “planned and protected” … and broke!)

Really… it comes down to your comfort level. How bad do you want to do a deal? Here is a hint: The sooner you actually make some money, the sooner the rest of all the irrelevent stuff will fall into place for you.

Just my drift… and yes, your team ain’t going anywhere this year!