If you want to know how to form a real estate LLC, you’ve come to the right place. Attorney-backed and approved, we’re here to guide you.
What’s an LLC for Real Estate?
Let’s start with the basics.
An LLC, or limited liability company is a business structure that helps protect your personal assets. Defined by the state you register your business in, an LLC for real estate separates your personal liability from your business liability.
Simply put, if someone sues your business, your home, cars, and other personal valuables aren’t at risk. Creating an LLC can be a good idea — if someone slips and falls on one of your properties, that property may be held liable.
Should You Create an LLC for Your Real Estate Business?
Investing in real estate can be a lucrative way to build wealth. Creating an LLC for your investments can help shield your personal assets from liability. It can also help protect your privacy. If you choose a name other than your own, your transactions come under the LLC and not your name.
For those investors managing properties, an LLC (or even multiple LLCs) helps protect against rental issues. As someone managing the homes where people live, you have great responsibilities. Keeping your business separate from your personal assets is essential.
Your real estate LLC can also leverage benefits such as a business bank account, flexible management, and advantageous tax structures.
The Advantages of Creating an LLC for Your Real Estate Investments
Protect Your Personal Assets
If someone brings legal action against your business, your personal assets are safe. It makes your business a separate legal entity. You can take business risks without fearing a total loss.
Makes Partnerships Easier
Having an LLC makes it easier to invest in properties with other investors. Deed changes can be complex. With a real estate LLC (and our help), you simply update your operating agreement instead.
Beneficial Tax Structure
An LLC’s default tax structure is a pass-through entity where earned income is taxed just like your personal income. You can also update the tax structure to an S-Corp or C-Corp. Choose the tax structure that’s best for you.
Easy to Form and Maintain
With our process, an LLC is easy to form. It’s also easier to maintain than a corporation. Just click Start My Business, and we’ll take it from there. And we help you stay compliant, freeing you to focus on your investments.
Our 5-minute process makes it quick and easy to form a business in your state.
- Choose your business name.
- Click Start My Business to register your LLC.
We can handle every part of your LLC formation:- Business structure designation
- Registered agent services
- Operating agreement creation
- File Beneficial Ownership Information (BOI)
- Employer Identification Number (EIN)
- Opt in to open your business account with Relay Bank
- Opt in to secure insurance with Tivly
We get you up and running as quickly and easily as possible, so you can start turning your dreams into reality. how it works. - Get your required local permits or licenses (if applicable).
- Stay compliant while you’re in business. These requirements differ based on local and state governments. Don’t worry! We specialize in helping you stay compliant.
Starting an LLC for a Real Estate Business: What to Consider
There are many aspects of running your own real estate company. It can feel overwhelming at first. Let’s walk through the most important aspects you’ll want to consider when starting an LLC. Remember, we are with you every step of the way.
Decide Your Business Structure
Choosing the right legal structure is the first step. Each has advantages and disadvantages.
Sole proprietorships are the easiest structures if you’re the only one in your business. You don’t need to file or register anything with the state. Because there’s no legal separation between your business and personal life, a sole proprietorship leaves your personal assets liable if your business is sued. You also have little-to-no privacy. The drawback is your personal assets aren’t protected.
As we mentioned above, LLCs, or limited liability companies, protect your personal assets from business liabilities. They also offer flexible taxation options. We highly recommend you at least form an LLC to hold your real estate.
A corporation is a structure that supports outside funding and growth at the highest levels. These are complex structures to register and to keep compliant. We can help with both if this is your plan.
Name Your Business
A business name can set you apart as you build trust and recognition in the market. People work with businesses they know, like, and trust. Your business name can create customer loyalty.
Your business name is an integral part of your brand identity. Start by brainstorming names that reflect your brand's values and ethos.
Once you have a shortlist, check for name availability in your state's business registry. You can often do this online via the state's Secretary of State website or business registration portal. It's also wise to conduct a trademark search using the United States Patent and Trademark Office's database. This ensures your chosen name isn't already trademarked by another entity. It helps prevent potential legal disputes in the future.
Once you have your name and structure, you’re set to form your LLC.
Create a Business Plan
Creating a business plan for your real estate company gives you a roadmap to guide your success. It maps out your goals, strategies, financial projections, and operational details. A well-laid-out business plan gives you and potential investors clarity.
There are several different formats for writing a business plan for your company. Most plans include these sections:
- Executive summary
- Company description
- Market analysis
- Organization and management
- Products and services
- Marketing and sales strategy
- Funding needs and requests
- Financial plan and projections
The idea is to get everything out of your head and into a document. It covers both the big picture and the small details.
Know Your Startup Costs
In general, the total average startup costs for forming a basic real estate LLC in the United States can range from $500 to $3,000 or more. Don’t forget about licenses and industry-specific certifications.
Talk to other business owners in your community — the real estate market varies by location. They’re a great resource for what to expect in running your business.
Analyze Your Market
Speaking of market variances, you want to conduct thorough market research and analysis. This helps you identify opportunities. Get familiar with local trends and competitors, challenges, and risks. Whether you’re looking at residential, commercial, or industrial investments, knowing the market ensures your investments align with your budget.
Start Networking and Building Relationships
Build a strong network of professionals, such as agents, contractors, attorneys, and mortgage lenders. Valuable insights, resources, and potential business opportunities all come from building relationships.
You’ll also benefit from getting to know title companies and inspectors. Finding trusted partners can mean a smoother purchase process.
Building a community within the real estate industry can enhance your credibility and expand your reach, ultimately contributing to your company’s overall success and growth.
Consider Property Management
Decide whether you’ll manage rental property operations in-house or outsource to a professional property management company.
Aspects to consider include:
- Developing tenant screening and management processes
- Implementing a system to collect rents
- Getting the necessary insurance
You may also want to separate your property management business from your investment business. Doing this is easy. You can register a DBA, or doing business as, or file for another LLC. We’re here to help with that!
Understand Tax and Legal Compliance
Understand relevant local, state, and federal laws, regulations, and tax implications related to transactions, property ownership, and business operations. Compliance avoids potential legal issues.
Registering your business as an LLC keeps compliance simpler than registering as a corporation. Regardless, each state has its own requirements. We designed our registered agent services to help you stay compliant.
As your business grows, so too does your tax responsibility. Make it a priority to know what’s best for your company. Outsourcing your accounting and bookkeeping can save you time and money. That’s why we offer those, too.
License Requirements
As someone investing in real estate, you don’t generally need to get your real estate license to do business. (Realtors do, of course!)
Some jurisdictions require licenses or permits for specific types of property. For example, the Short-Term Rental Registration Law in New York City requires anyone who rents properties to register with the Mayor’s Office of Special Enforcement.
For those who choose to manage properties, with very few exceptions, you can establish a separate management company to manage them. You just wouldn’t be able to manage properties for other owners or collect commissions.
If you’re going to conduct real estate transactions on behalf of somebody else, you need a license. You want to make sure to know the laws in your jurisdiction.
Determine an Exit Strategy
An often-missed aspect of running a successful business is having a well-defined exit strategy, whether it's to the business, transfer ownership, or liquidate assets. You want a clear path for capitalizing on your investments and efforts.
You likely want your real estate LLC to fund your retirement. Your exit strategy outlines how to monetize your business best and convert it into a retirement nest egg or hold onto it for predictable income.
If attracting investors is in your long-term plan, potential candidates will want to know how you plan on leaving the business. This affects their return on investment.
3 Reasons to Choose LLC Attorney for for Your
Real Estate Business LLC
Fast
Get your LLC formation filed within 24 hours. When you’re ready, we’re ready.
Affordable
We keep our pricing low and transparent. You don’t have to worry about surprise costs.
Reliable
We have a curated group of experienced attorneys and paralegals.
Written By
Welcome to LLC Attorney, where our mission is to make the process of forming and maintaining your LLC as smooth and stress-free as possible. Our team is a dedicated group of professionals with a shared passion for helping businesses thrive.
