Legal Question in Business Law in New Jersey

Re: Real Estate in LLC & Selection of Formation State

If the property is not going to be occupied as your primary residence (which has significant income tax benefits on resale), but only for fix-up and resale, the only benefit of using a LLC is the limited liability in the event of an accident while owning it, or if economic hardship occurs and you cannot pay the workmen or suppliers. LLC provides protection from personal liability if you have not or are not required to personally guaranty any debts incurred in the purchase, fix-up, operation or sale. As a one-man LLC, you file Schedule "C" on your income tax return to report income, expenses and gain. If there are 2 or more people involved, you file Form 1065 (partnership return) and the fees are $150/member each year. There are extra costs involved also in setting up and operating the LLC: formation of the LLC runs about $150.00 in filing fees, there is an annual report (about $50 each year), the fee (tax) of $150 each year (if more than one member, the Form 1065 replaces Schedule "C" so there could be an accountant's fee, and the fee(tax) is $150 for each member annually), and the cost of dissolution when the LLC ends, again about $150. If the limited liability protection is worth these costs, do it. For the same cost or less, you could consider just buying additional liability insurance or an excess liability rider to your current insurance. If you need help in the formation, etc., I can do this and my fee would be $200. One last note: If you use the one-man form, you still need to apply to IRS for a Tax ID number, you do not use your social security number on your return for the LLC business).