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white pine

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Hello!
We are looking at a 19 acre property with 1100 of lakefront which includes an old inn which has been shuttered since the 1980's as well as an 8 unit motel which was open in 2008. This place is special to us, we stayed there for years, had our honeymoon there, got to the point where we went up to help open it in the spring and we actually tried to buy it from the po in the 90's. At that time I discovered PAII and bought lots of books which I studied, wrote a business plan and ran it past our accountant. We have been involved with historic remodels before, and although I always say never again, we usually do. Older, not much wiser. Although we have discussed price with the current owner, we have not made an offer yet.
The previous owner has passed and the new owner ,who inherited it , has it for sale. He knows us and is willing to work with us on finance. We are cautious. So far we have talked with the county: building inspector, health dept., septic installer, food service, and have had our architect and contractor look at the place. Because it is on the National Register of Historic Places, we also met with the state historic architect and reviewed our proposed remodeling. It appears that with the remodel, we would be eligible for a 30% tax credit. Oddly, instead of being discouraging, all of these people are supportive. The building inspector even offered to come through "off the record" to give us some ideas. Turns out the septic person knew the property well and his mother even baked there back in the day.
Anyway, our accountant suggests that we form an llc to hold the property with another llc with a lease agreement with the holding llc to run the motel. Possibly a third llc for the inn when it becomes available. What ownership organization do you recommend?
 

EmptyNest

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Wow you are in for some time ahead with this.
Do you have the $$$ to do all of this? If not, Have you even tried to look for financing yet?
You really need to talk with a professional about this which you obviously have. My first thought was you definitely need to set up some type of corp to protect the different entities and yourself for sure.
Also you say you have talked to different county officials....please be sure you have EVERYTHING in writing. We have heard and read so many horror stories about things people "thought" were ok and now face all sorts of issues and even bankruptcy because they were not.
Good luck to you. Sounds like real challenge ahead, especially give the state of the economy right now. Is this a good location?
 

swirt

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Hi White Pine and welcome to Innspiring.com

We are small (3 rooms) and set up as a DBA under my wife's name. I think if I had it to do over again I would choose the LLC method. Definitely if I were the size you are talking about I would want the protection that an LLC or multiple LLC's offer.
 

YellowSocks

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I don't know much about business entities so I can't advise.
It's awesome that you are encountering such support! We, also, were well received... small town, anything new is a good thing!
=)
Kk.
 

bbinnsitters

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Hi White Pine and welcome to Innspiring.com

We are small (3 rooms) and set up as a DBA under my wife's name. I think if I had it to do over again I would choose the LLC method. Definitely if I were the size you are talking about I would want the protection that an LLC or multiple LLC's offer..
Swirt,
I've recently been told that I should set up a checking acct as DBA - what are the benefits? I already have a personal checking account that I use only for my business. The bank is offering a promotion for business accounts, but I am clueless as to what the benefit would be or if there are any tax reasons I should do it. Any help from anyone would be greatly appreciated.
 

seashanty

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llc, possibly more than one, is my suggestion. great to get advice from an accountant, now how about from an attorney? and check with s.c.o.r.e. they can give amazing insight sometimes.
welcome
and best of luck to you. i sense enthusiasm on your part and that you see big potential. sounds great!
 

Morticia

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I always suggest talking to an accountant. Especially with a property that large that also involves a restaurant.
If you're doubting your acct, ask more questions...why does the acct think this is a good idea? What other options are there? Pitfalls of all of them?
 

Morticia

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Hi White Pine and welcome to Innspiring.com

We are small (3 rooms) and set up as a DBA under my wife's name. I think if I had it to do over again I would choose the LLC method. Definitely if I were the size you are talking about I would want the protection that an LLC or multiple LLC's offer..
Swirt,
I've recently been told that I should set up a checking acct as DBA - what are the benefits? I already have a personal checking account that I use only for my business. The bank is offering a promotion for business accounts, but I am clueless as to what the benefit would be or if there are any tax reasons I should do it. Any help from anyone would be greatly appreciated.
.
If there is ever a question about where the money is going or is this a 'real' business, showing that you are keeping your personal money separate from the inn and that the inn is paying it's own bills, is worth having 2 checking accts. With only one checking acct, it's just you, no business.
 

egoodell

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Wow you are in for some time ahead with this.
Do you have the $$$ to do all of this? If not, Have you even tried to look for financing yet?
You really need to talk with a professional about this which you obviously have. My first thought was you definitely need to set up some type of corp to protect the different entities and yourself for sure.
Also you say you have talked to different county officials....please be sure you have EVERYTHING in writing. We have heard and read so many horror stories about things people "thought" were ok and now face all sorts of issues and even bankruptcy because they were not.
Good luck to you. Sounds like real challenge ahead, especially give the state of the economy right now. Is this a good location?.
Sounds complicated, three LLCs???
We are an LLC for our B&B and another LLC for our wine tour business. We just do what our CPA tells us. I would only go with a CPA and especially one that has experience with the hotel/B&B/motel industry. Does your accountant have experience in the lodging industry?
Riki
 

white pine

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Wow you are in for some time ahead with this.
Do you have the $$$ to do all of this? If not, Have you even tried to look for financing yet?
You really need to talk with a professional about this which you obviously have. My first thought was you definitely need to set up some type of corp to protect the different entities and yourself for sure.
Also you say you have talked to different county officials....please be sure you have EVERYTHING in writing. We have heard and read so many horror stories about things people "thought" were ok and now face all sorts of issues and even bankruptcy because they were not.
Good luck to you. Sounds like real challenge ahead, especially give the state of the economy right now. Is this a good location?.
Thanks for the input. The scary thing is we do have the money to do it. Life is good for us now. We have enough for a heavy down, about 30% and a good chunk for renovation to begin without running out of money for reserve expenses. The husband will continue his consulting business. We will have to sell our residence, which the feds would like to buy because we are an inholding in a wilderness area, (we have another home near the state capital). When it sells we could pay the inn off or carry a small loan for the remaining remodel. We are allowing for expenses on both properties for a couple of years.
As for getting things in writing, we are going by state code. There is no local inspection, and the county goes by state code. Our big question is what will be required, and how much to bring it up to code? Hence the builder and architect.
I had a specialty retail business which I had for fifteen years. If you want a brutal business try retail. Oddly, I enjoyed it, and I hear people still miss my shop. I have dealt with employees, PITAs, marketing, taxes, credit cards, building maintenence, emergencies- - I got out when elderly parents required more attention than I could give. Our accountant specializes in small businesses, and we will certainly talk with our lawyer if we do this.
We think it is in a good location it is about 1/2 hr from the major tourist area in the state, and just off the highway on route to some additional points of interest including a major migratory flight path. The highway is a designated bike touring route. The lake is no longer stocked because it has a sustaining population of walleye and lake trout. It needs marketing, the p.o. worked very hard after her husband died to hold business down to what she could handle. She got it off every chamber and web listing. The only people who stayed there knew about it and had been picked as her special paying guests. She liked researchers,audubon members, bike touring groups, and the generations of families who had been coming there for years. She believed this was a special place, and we do too-- it's the only reason we would consider this.
I was just wondering if anyone else is doing the LLC leasing to LLC, and how it is working for them?
 

Samster

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I think many larger properties are LLCs and may do lease agreements to the inn owners for their part of the property. I would check with a local business CPA who preferably has worked with lodging properties as to your best business structure for tax purposes, etc. A lot of us here are smaller inns (under 10 rooms) and are DBAs.
Best of luck and
!!
 

Skamokawa

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We were given similar legal advice. A second opinion is always a good thing, in addition to your study and experience. Sounds like your heart is well tempered by your head. Best of luck from a couple of 'we did it once, that's enough' historical dist. renovater/restorers.
-KathleenM
 

gillumhouse

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Welcome!!! Listen to your accountant and lawyer. It sounds as if you have been using your head more than your heart in this so far - good move. The heart does have a place - the passion is needed to sustain both you and the business - but in starting the venture using the head offers a better chance of success. The fact you are familiar with the area and know what to market is a big plus.
Best to you and good luck.
 

white pine

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I always suggest talking to an accountant. Especially with a property that large that also involves a restaurant.
If you're doubting your acct, ask more questions...why does the acct think this is a good idea? What other options are there? Pitfalls of all of them?.
I'm thinking along those lines-- I am the original skeptic. I was hoping to hear feedback from those actually doing it (the LLC to LLC). I am always thinking outside the box, but I want to be safe and legal. I just am looking at the real world. She also told me years back I could not use a credit union for my business account and tax payments. I found although they did not do comericial loans at the time, they did do business accounts and I was able to do my payroll tax payments too. I saved a great deal in fees, and for a long time even earned interest on my checking! The accountants have been very helpful over the years, and they do alot of small businesses (including at least one motel and a b&b that I am aware of). By the way,I am not interested in doing a restaurant. The kitchen has been used in the last couple of years for a wedding and a large group dinner, but the property is located just outside of a small town and there is a good family restaurant in town.
 

gillumhouse

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I always suggest talking to an accountant. Especially with a property that large that also involves a restaurant.
If you're doubting your acct, ask more questions...why does the acct think this is a good idea? What other options are there? Pitfalls of all of them?.
I'm thinking along those lines-- I am the original skeptic. I was hoping to hear feedback from those actually doing it (the LLC to LLC). I am always thinking outside the box, but I want to be safe and legal. I just am looking at the real world. She also told me years back I could not use a credit union for my business account and tax payments. I found although they did not do comericial loans at the time, they did do business accounts and I was able to do my payroll tax payments too. I saved a great deal in fees, and for a long time even earned interest on my checking! The accountants have been very helpful over the years, and they do alot of small businesses (including at least one motel and a b&b that I am aware of). By the way,I am not interested in doing a restaurant. The kitchen has been used in the last couple of years for a wedding and a large group dinner, but the property is located just outside of a small town and there is a good family restaurant in town.
.
By the way,I am not interested in doing a restaurant. The kitchen has been used in the last couple of years for a wedding and a large group dinner, but the property is located just outside of a small town and there is a good family restaurant in town.
That sounds like a smart move in MNVHO. I know I do not want to work that hard! B & B is hard work and restaurant is hard work. Unless you have someone who is restaurant savvy, I would stick with the B & B too.
I do know pf a couple B & Bs though that are supported by their restaurants but they do have staff and are high-end restaurants. One has a huge statewide rep so people drive just to eat there - and I think the B & B picks up rooms to enhance the experience (and also makes savoring the wine cellar more available as it eliminates the DUI problem).
 

Innkeeper To Go

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Welcome WP! Sounds like you've done your homework and following your accountant's advice.
Best of luck to you. Hope you'll stick around and keep us all informed of your progress as you go along.
 

Morticia

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Wow you are in for some time ahead with this.
Do you have the $$$ to do all of this? If not, Have you even tried to look for financing yet?
You really need to talk with a professional about this which you obviously have. My first thought was you definitely need to set up some type of corp to protect the different entities and yourself for sure.
Also you say you have talked to different county officials....please be sure you have EVERYTHING in writing. We have heard and read so many horror stories about things people "thought" were ok and now face all sorts of issues and even bankruptcy because they were not.
Good luck to you. Sounds like real challenge ahead, especially give the state of the economy right now. Is this a good location?.
Thanks for the input. The scary thing is we do have the money to do it. Life is good for us now. We have enough for a heavy down, about 30% and a good chunk for renovation to begin without running out of money for reserve expenses. The husband will continue his consulting business. We will have to sell our residence, which the feds would like to buy because we are an inholding in a wilderness area, (we have another home near the state capital). When it sells we could pay the inn off or carry a small loan for the remaining remodel. We are allowing for expenses on both properties for a couple of years.
As for getting things in writing, we are going by state code. There is no local inspection, and the county goes by state code. Our big question is what will be required, and how much to bring it up to code? Hence the builder and architect.
I had a specialty retail business which I had for fifteen years. If you want a brutal business try retail. Oddly, I enjoyed it, and I hear people still miss my shop. I have dealt with employees, PITAs, marketing, taxes, credit cards, building maintenence, emergencies- - I got out when elderly parents required more attention than I could give. Our accountant specializes in small businesses, and we will certainly talk with our lawyer if we do this.
We think it is in a good location it is about 1/2 hr from the major tourist area in the state, and just off the highway on route to some additional points of interest including a major migratory flight path. The highway is a designated bike touring route. The lake is no longer stocked because it has a sustaining population of walleye and lake trout. It needs marketing, the p.o. worked very hard after her husband died to hold business down to what she could handle. She got it off every chamber and web listing. The only people who stayed there knew about it and had been picked as her special paying guests. She liked researchers,audubon members, bike touring groups, and the generations of families who had been coming there for years. She believed this was a special place, and we do too-- it's the only reason we would consider this.
I was just wondering if anyone else is doing the LLC leasing to LLC, and how it is working for them?
.
white pine said:
I was just wondering if anyone else is doing the LLC leasing to LLC, and how it is working for them?
This is how we are set up.
 

Morticia

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I always suggest talking to an accountant. Especially with a property that large that also involves a restaurant.
If you're doubting your acct, ask more questions...why does the acct think this is a good idea? What other options are there? Pitfalls of all of them?.
I'm thinking along those lines-- I am the original skeptic. I was hoping to hear feedback from those actually doing it (the LLC to LLC). I am always thinking outside the box, but I want to be safe and legal. I just am looking at the real world. She also told me years back I could not use a credit union for my business account and tax payments. I found although they did not do comericial loans at the time, they did do business accounts and I was able to do my payroll tax payments too. I saved a great deal in fees, and for a long time even earned interest on my checking! The accountants have been very helpful over the years, and they do alot of small businesses (including at least one motel and a b&b that I am aware of). By the way,I am not interested in doing a restaurant. The kitchen has been used in the last couple of years for a wedding and a large group dinner, but the property is located just outside of a small town and there is a good family restaurant in town.
.
Something to consider VERY CLOSELY is to lease the restaurant out. Even tho you say there is a family restaurant nearby, sometimes that is not enough. Guests might like some options.
We looked at a place with a restaurant and I totally did not want to deal with that. BUT, sometimes it's the food that makes the money for you in the lean times.
If you couls work out a deal with a chef who is looking for a biz opportunity, it could be a win-win for everyone. Maybe not your first year out, but down the line. If the bank wants to know what plans you have, that's an option to tell them about.
 

gillumhouse

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I always suggest talking to an accountant. Especially with a property that large that also involves a restaurant.
If you're doubting your acct, ask more questions...why does the acct think this is a good idea? What other options are there? Pitfalls of all of them?.
I'm thinking along those lines-- I am the original skeptic. I was hoping to hear feedback from those actually doing it (the LLC to LLC). I am always thinking outside the box, but I want to be safe and legal. I just am looking at the real world. She also told me years back I could not use a credit union for my business account and tax payments. I found although they did not do comericial loans at the time, they did do business accounts and I was able to do my payroll tax payments too. I saved a great deal in fees, and for a long time even earned interest on my checking! The accountants have been very helpful over the years, and they do alot of small businesses (including at least one motel and a b&b that I am aware of). By the way,I am not interested in doing a restaurant. The kitchen has been used in the last couple of years for a wedding and a large group dinner, but the property is located just outside of a small town and there is a good family restaurant in town.
.
Another thought on the subject - if there is a "family" restaurant down the road, it means there is an opening for a finer dining experience. Unless you have a chef in the family (or interested) waiting until you get the B & B under way OR the B & B comes after the restaurant - I would not try to do all at the same time. I am aware of my limitations.
 

Sanctuary

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It's not all that unusual to have several LLC - one to hold the propery, one to manage the property, and I've even seen another LLC to hold the holding LLC! It buries you so deep under the mountain of LLCs that if there is a liability claim, there will be a lot of layers to peel before they ever get to YOU. I saw that a lot when I used to do business litigation. Nobody's personal name was on anything.
I'm small, but I'm still a Delaware LLC, d/b/a..... Keep all the money separate, of course.
 
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