Starting A Nevada LLC For Flipping Houses

Thinking of entering the industry of flipping houses? If so, you need a business entity that can provide you with asset protection from the common pitfalls associated with real estate investing. One excellent example is a Nevada limited liability company (LLC).

A Nevada LLC shields your personal assets from any debts or legal claims your house-flipping business incurs, keeping it away from legal and financial setbacks. This protection is invaluable in a lucrative and high-risk, high-reward industry like real estate.

But there’s more to what Nevada LLCs can offer. Below, we’ll discuss everything you need to know about starting a Nevada LLC for flipping houses and explore which entity is best for this venture: an LLC or an S-corp.

Read on to discover the benefits of forming an LLC for flipping houses.

What is a Limited Liability Company?

A limited liability company (LLC) is a legal entity separate from its owners. It combines a corporation’s liability protections with a sole proprietorship’s pass-through tax status.

Since LLCs are considered separate legal entities, they can own properties and enter contracts using their own name. This setup protects you and your assets from the common risks of house-flipping, like debt and property disputes.

LLCs also have pass-through tax status, which means they don’t pay any taxes. Instead, their profits and losses are passed to their owners who report them on their tax returns.

Benefits of Starting a Nevada LLC For Flipping Houses

Besides limited liability and pass-through taxation, there are several other benefits to starting a Nevada LLC for flipping houses, such as:

Flexible Management Structure

Unlike corporations that follow one management structure, Nevada LLCs can be member-managed or manager-managed.

If an LLC is member-managed, its members will be responsible for its daily operations. Conversely, if an LLC is manager-managed, its members must appoint or hire managers to manage the company on their behalf.

This flexible structure allows you to tailor the structure of your business to its needs and goals.

Stronger Asset Protection

Nevada’s laws are considered the golden standard for asset protection. They include statutes that strengthen an LLC’s built-in shield, such as comprehensive charging order protections and robust asset protection trusts.

Although most states have charging order protections for LLCs, they’re only available to multi-member LLCs. Nevada is one of the few that have extended this protection to single-member LLCs.

In addition, the state’s asset protection trusts are among the strongest in the nation. Unlike other self-appointed trusts, the Nevada Asset Protection Trusts (NAPTs) have a two-year statute of limitations and do not have exception creditors.

Any creditor who wants to challenge a NAPT has only two years to file a claim. Once this period expires, the creditor loses the right to pursue the trust assets.

In addition, Nevada’s asset protection laws prohibit exception creditors from accessing an NAPT even after its statute of limitation expires. An exception creditor can access assets in a trust, such as a former spouse with divorce-related or child support claims.

Credibility

Credibility is crucial in a competitive market like real estate. You want to build trust among potential clients and investors.

People often perceive LLCs as more established and trustworthy entities. They’re more likely to do business with you if they believe you have a legitimate venture.

Which Entity is Better For Flipping Houses: LLCs or S-corps?

An S-corporation is very similar to a normal corporation, except it has the pass-through tax status that LLCs enjoy. Although S-corps can be advantageous for flipping houses, these entities have limitations that may make them less suitable for some investors.

For instance, S-corps are restricted to a maximum of 100 shareholders. You won’t be able to invite more investors into your company once you’ve reached this threshold. Setting up an S-corp also requires more paperwork and overhead than an LLC, which can overwhelm new entrepreneurs.

So, before you choose an entity for your house-flipping business, we recommend carefully considering your needs and goals.

How to Start A Nevada LLC For Flipping Houses

Establishing an LLC for house flipping is relatively easy.

Choose A Business Name

Like most states, Nevada requires its LLCs to have a unique name that isn’t similar to any existing business name. You can check the availability of your chosen name using the Nevada Business Search Tool found on the SilverFlume business portal.

Hire A Registered Agent

A registered agent is a person or company designated to receive legal correspondence for your Nevada LLC. You can assign anyone to be your registered agent so long as they meet the following requirements:

• Must be 18 years of age or older.
• Must have a physical street address in Nevada.
• Must be available to receive legal correspondence during regular business hours.

File Your Formation Documents

To start a Nevada LLC, you must submit the following documents to the Nevada Secretary of State and pay their respective filing fees:

• Articles of Organization: $75
• Initial List of Managers: $150
• State Business License: $200

In total, you have to pay $425 to form your LLC. You can file your formation documents through the SilverFlume business portal or by mail.

Get an Employer Identification Number (EIN)

Lastly, you must obtain an Employer Identification Number (EIN) from the IRS. 

An EIN is a unique nine-digit code the IRS uses to identify businesses for tax purposes. Your LLC will need one to file tax returns, open business bank accounts, and hire employees.

EINs are free; you can get them through the IRS website or mail.

Start Flipping Houses With A Nevada LLC

Asset protection is vital in a high-risk, high-reward industry like real estate. With so many pitfalls that you could face, from legal disputes to market fluctuations, you must have a business entity that will protect your hard-earned assets.

Fortunately, Nevada LLCs can give you the asset protection you need to pursue your house-flipping venture confidently.

Don’t leave your investments vulnerable. Take a proactive step today and start your Nevada LLC with NCH’s help.

At NCH, we’re committed to helping clients like you build robust Nevada LLCs for their real estate ventures. Our business formation specialists will provide personalized support tailored to your needs and goals.

Visit our website here to learn more about our LLC formation services, or call us at 1-800-508-1729 to schedule a free consultation. 

Disclaimer: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.