How to start an LLC
This is the first post of my investor series, if you are a beginner looking to start investing in real estate then this post is for you! Please note I am not a lawyer or tax advisor and these tips may not be the best fit for everyone. I am a licensed Realtor in the state of Virginia, and these are tips and tricks I’ve learned and implemented from my peers and fellow investors throughout my career.
Why an LLC?
“A limited liability company (LLC) is an unincorporated association of one or more members (the owners) who share in the profits and losses of the company’s business. It is managed in accordance with an operating agreement by one or more members (member-managed) or by one or more managers (manager-managed). A limited liability company is a separate legal entity and, generally, the members and managers are not liable for the obligations of the limited liability company.” Virginia SCC
An LLC offers structure to your business. With an LLC you can be the sole member or designate roles and ownership within your company, which is ideal when investing with partners. An LLC will also protect your personal assets in the event someone tries to sue you. Many investors I work with register each investment property into its own LLC to protect their assets.
First- Pick a name
This can be a creative or generic as you want it to be! It just can’t belong to anyone else. If you plan to make a website and social media platforms for this business, make sure the name is available on all social media platforms. You will also want to run it through a domain checker such as GoDaddy. If you decide to change your name later, its ok! You can still use the same LLC and change the name by utilizing a DBA or doing business as.
Second- Register your business with your State
In Virginia we use Virginia State Corporation Commission and the filing fee for the state is $100. This may vary by state.
If your business is in Virginia, here is a step by step guide for setting up your LLC online through the SCC.
You will need to know how you plan to structure your LLC, either member managed or manager managed and who you want to make the registered agent. A registered agent is a responsible party who is available to receive and process important notices and Government correspondence. In Virginia, this can be yourself if you meet the qualifications or a local law firm. I would recommend checking with your attorney on the best registered agent for your company.
Third- Create an Operating Agreement
Once you have filed your Articles of Organization with the SCC you will want to have an Operating Agreement drafted. You can have a lawyer draft one up or find a template online that bests suites your needs.
Forth- Request an EIN from the IRS
Next you will got to the IRS website and fill out the application to receive your EIN. This will allow you to open a bank account and file taxes for your business!
Need additional help?
If you live in a different state and not sure where to start or you want an easy one stop shop, check out Zen business! They will check the name, file the articles of Incorporation, be your registered agent, establish an EIN on your behalf AND draft the operation agreement. They make it super convenient and affordable!
Fifth- Set up a business account
Next, you will want to set up a business account and structure your account for the easiest way to manage you money.
Check out my next post on how I utilize the 10%, 40%, 25% and 25% rule!
Have more questions, I’m happy to help!
