Invest in a Limited Liability Corporation?

Dear Dr. Don,

I was recently contacted via mail by a tax-consulting firm about how it could reduce my mortgage. Then, a tax specialist called me. After discussing my finances, the person suggested that I invest in a limited liability company, or LLC, to increase my income. Is this a good way to invest my money?


-Sylvia Sedulous

Dear Sylvia,

Let's get this straight: You reached out to a tax-consulting firm after receiving a direct mailing telling you that they could reduce your mortgage, and now they're providing you with investment advice. Back away from this opportunity.

A limited liability company is a form of business organization. The decision to invest in a business should be based on the company's prospects, not how it's organized. The LLC's ability to provide investors with income depends on how well it does its business.

It's clear you need someone in your corner when it comes to managing your finances. I'd like to suggest that you work with a financial planner, ideally on a fee-only basis, meaning no commission. You need a trusted adviser, someone who's looking to make money for you instead of off you. If you can't get comfortable with the advice, get a second opinion -- much as you did by submitting your question.

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