How Real Estate Investors Create an LLC

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A Limited Liability Company (or LLC) is a legal entity that allows investors to buy, own, and sell real estate as a business entity rather than an individual. This offers investors protection from personal liability, tax benefits, and the ability to easily scale and grow their investment portfolio. 

While there are a variety of business structures to select from, the LLC is particularly popular with real estate investors because it offers many of the same protections that corporations have yet it’s much easier to create an LLC and provides lots of flexibility. 

To help you determine if it’s right for you, here’s a step-by-step guide for setting up a limited liability company as well as tips to help you determine the right strategy to meet your individual goals. 

Steps to Create an LLC 

While the specific requirements vary from state to state, there are a few basic steps that all investors will have to follow to set up an LLC: 

1. 1. Pick a Business Name. Some states have specific requirements for names and all business names must include the words Limited Liability Company, LLC, or L.L.C. Your state’s secretary of state should offer a searchable database with available business names. 
   2. File Articles of Organization. Sometimes known as Articles of Formation or Certificate of Incorporation, the Articles of Organization is a document that new LLCs must access from their secretary of state, complete, and file. Once this is submitted and approved, your business is likely registered and can begin business operations. 
   3. Create an Operating Agreement. This is a document that outlines how your LLC will function. It includes key details like operating rules, the rights and responsibilities of owners, how conflicts will be resolved, and how profits and losses will be handled. 
   4. Appoint a registered agent. This individual should be located in or near the state where the LLC operates. The registered agent serves as a point of contact for the LLC and can receive service and notices. 
   5. Get an Employer Identification Number. This is a nine-digit number issued by the IRS that will be used to identify your business on important legal documents, including taxes. 

How to Get Started

If you’re ready to establish a business entity for your LLC, we recommend two initial steps: 

1. Visit your state’s Secretary of State website to ensure that you know all the requirements for your state. 
2. Consult with a local attorney about the specifics for setting up an LLC in your area. While the process is relatively straightforward, it’s important to make sure that you do everything right and don’t skip any steps. Because of this, we’ve found it’s worth it to consult with a professional that can guide you through the process and ensure that nothing is overlooked. 

In addition, before setting up an LLC it can be a good idea to consult with a professional about the best business structure to meet your needs. For example, the team at Anderson Advisors meets with investors to determine the right structure to offer asset protection, tax planning, and strategic business planning. They help investors decide what structure is right for them and then guide them through the formation process. If you’re not sure where to start, scheduling a Strategy Session with them or checking out their online resources is a great first step to help you create an LLC. 

Savvy Landlords Get the Most Out of Their Investments

Setting up the right business structure is one important step for maximizing the return on your investment and getting the most out of your experience as a Landlord. Another important step is having the tools you need to find Tenants and manage your property. 

We can help with this! Visit ezLandlordforms.com to start a tenant screening, create a state-specific Lease Agreement, or access key property management forms.