I’ve done a lot of episodes on this podcast over the past ten months or so, and I’ve covered a lot of different subjects. But I’m realizing that just because I covered something a hundred episodes ago, that doesn’t mean that every listener has heard it. I’m going to start answering some of the questions that I get via email even if I’ve gone over these topics a while ago. Stay tuned–this week we’re going to go back to basics.
In this episode, I want to talk about business names and corporate entities. Right off the bat I want to give you a quick disclaimer: I am not a lawyer and I am not a CPA. I’m not here to give you legal or tax advice. I’m just going to tell you what I know to be true from my experience as a real estate investor.
My philosophy on business names and entities is that you don’t need them before you’ve done your first deal. Who cares what entity you have if you’ve never flipped a house? You can form any kind of entity you want; it doesn’t even come into play until you start making money. Obsessing over these details often keeps people from getting started.
My advice is to find your first deal, get it under contract, and then start thinking about a business name and entity. And even then, I’m not positive it’s necessary right away.
Once you do get to the point where you need to form a corporate entity and pick a business name, how do you do it?
When I picked my business name, I went about it the wrong way. I think that business names should be more personal and reflect you and your business. Don’t try to create this corporate sounding business name–it’s even silly sometimes when you’re just one person flipping a couple of houses. You don’t have to sound like you’re more than you are. I just formed a new entity recently to handle the rental portion of my business, and I just used my last name: Simmons Properties. It’s simple, and it makes people feel that there is a real person behind the business. People tend to remember more personal names and it makes them feel at ease. In any case, a name is a name and I don’t think it’s going to make or break your company. Don’t obsess over finding a name. Just set a time limit for yourself and pick one.
As far as entities go, pretty much everyone I know formed an LLC when they started. They’re relatively easy to form, simple, and straightforward. In most states in the US, you can go into your state’s website and check that the name you want to use isn’t already taken. I can’t imagine how you could go wrong forming an LLC to start with. If you get to a point where your business is really handling a lot of volume, make sure you consult a lawyer and a CPA to find out what kind of corporate entity makes sense for you.