How to Set Up a Real Estate LLC
LLCs are the most popular structure for real estate businesses. That's because starting and running a limited liability company (LLC) is simple and offers important benefits.
LLCs can protect your personal assets (car, house, savings) if your real estate business is sued. LLCs also offer credibility and options to save on taxes.
Recommended: Use Northwest ($29 + State Fees) to form your real estate LLC for you.
Starting a Real Estate LLC Is Easy
You can set up a real estate LLC by registering the appropriate formation documents with your state’s business division (typically the Secretary of State). The cost to get a real estate LLC varies based on the state but costs about $100 on average.
Important: If you already own property and you have a mortgage, it’s important to understand your lender’s requirements before transferring title to a new LLC.
Follow our How to Set Up a Real Estate LLC guide below to get started.
Step 1: Select Your State
The best option is to form an LLC in the state where you live and plan to do business in. If your business will have a physical presence (storefronts, offices, sales reps, etc.) in different states, you'll need to register a foreign LLC in those states. Use our state-specific guides below to learn how to start a real estate LLC in your state:
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- Washington D.C.
- West Virginia
Step 2: Name Your Real Estate LLC
Choosing a company name is the first step in forming a real estate LLC. You’ll need to give your business a unique name that meets your state’s naming requirements.
You’ll officially register your name when you file your formation documents.
- Choose a name that meets your state’s naming requirements. While requirements vary by state, your name typically must include the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.)
- Check if the name is available in your state. Make sure the business name you want isn’t already taken by doing an LLC name search online
- Use naming tools like our LLC Name Generator and How to Name a Business guide if you need help brainstorming real estate business names.
- Check to see if your business name is available as a web domain. You may want to buy the URL to prevent others from using it.
Step 3: Choose an LLC Registered Agent
When you file your formation documents, you'll need to list a registered agent, also known as a resident agent, statutory agent, or agent for service of process.
A registered agent's job is to accept legal documents like service of process and tax notices for your LLC.
Your real estate LLC’s registered agent can be a person or a registered agent service. You can be your own registered agent, but many business owners choose to use a registered agent service.
Things to think about before choosing a registered agent include:
- Availability: You’ll need to be available during normal business hours (i.e., 9 a.m.–5 p.m. Monday through Friday) at the address you provide
- Public Records: If you run your business from home, you’ll have to make your personal address public
- Privacy: You could be served with a lawsuit in front of your family or coworkers
Many of the best LLC services offer a free year of registered agent service when you hire them to form an LLC.
Step 4: File Your LLC's Formation Documents
To register your real estate LLC, you’ll need to file the Articles of Organization (also referred to as a Certificate of Organization or Certificate of Formation) with your state’s business division. Most states allow you to file formation documents online.
Now is a good time to decide whether your LLC will be member-managed vs. manager-managed.
Step 5: Create a Real Estate LLC Operating Agreement
An LLC operating agreement is a legal document that outlines the ownership and member duties of your real estate LLC. Five states require LLCs to maintain an operating agreement (California, Delaware, Maine, Missouri, and New York), but every LLC should have one.
Even single-member LLCs can benefit from having an operating agreement.
Your operating agreement should outline the following:
- Each member’s responsibilities
- How new members will be admitted
- How existing members may transfer or terminate their membership
- How profits and dividends will be distributed
- How and when capital calls will be made
- Manager indemnification regarding mistakes made in good faith
- Tax and reporting timing
- Interest transfer and first right of refusal to members if property is to be sold
You can add provisions to your real estate LLC operating agreement, as long as they don't conflict with your state’s law.
Recommended: Download a template or create a custom free operating agreement using our tool.
Step 6: Get an EIN
An Employer Identification Number (EIN) is a number that’s used by the US Internal Revenue Service (IRS) to identify and tax businesses. It’s basically a Social Security number for a business.
EINs are free when you apply directly with the IRS. Visit our What Is an EIN guide for instructions on getting your free EIN.
Steps After Forming a Real Estate LLC
After forming your real estate LLC, you’ll need to do the following:
- Open a Business Bank Account. A business bank account legally separates personal finances from business finances. This separation is required to maintain your LLC's corporate veil (i.e., your limited liability protection).
- Transfer Existing Property(s) to Your New LLC. If you already own property that you’ll be transferring to your new LLC, you’ll need to record a deed that reflects this change. This can be done with the help of a title company or on your own. We recommend contacting a title company or your county clerk to get started.
- Update Your Lease. If you are transferring existing rental property to a new LLC, you’ll need to update your residential lease agreement to reflect new ownership.
- File Your State’s LLC Annual Report. Most states require LLCs to file an annual or biennial report to update their business information.
Need Help Forming an LLC?
Read our Best LLC Services review to learn more about hiring an LLC formation service.
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