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How to Set Up an LLC to Protect Yourself in Real Estate Investing
One of the simplest business structures for your real estate investing activities is the LLC, or Limited Liability Company. Real estate investors have discovered that this is one of the simplest, most cost-effective ways of limiting risk and personal financial liability.
An LLC gives you the flexibility and ease of operation of being an individual, but still grants you many of the legal protections of a corporation. As a result, many real estate investors choose to take title to property in the name of an LLC.
Setting up an LLC is a relatively pain-free operation. I’ve provided handy links to each of the Secretary of State offices so that you can visit their website for more details about establishing an LLC of your own.
The process is simple. Most states now permit online applications, but if you’re more comfortable you also have the option of printing out the forms, filling them out, and mailing them to the appropriate office.
While some real estate investors choose to seek professional assistance in filing the required paperwork, the process is simple enough that even a beginning investor can easily complete it.
Each state has slightly different requirements, but they are basically the same regardless of where you live. Some of the questions on the form include the name and tax identification number for the LLC, as well as the legal address, etc.
You simply fill the form out, include the appropriate filing fee (usually about $350) and mail it to the Secretary of State in the state in which you are making application.
The filing process is simple, and in most cases fairly straightforward. It makes perfect sense to protect yourself – and your assets – by taking these simple steps.
Every state has a variety of resources available for real estate investors on their website. If you don’t yet have a website of your own, you should consider entering the 21st century. A website can help you to market your business and build a substantial real estate investing portfolio. An LLC can help you keep it.
To get a website, go to: http://www.InvestorSecretWeapon.com
State Listings – Secretaries of State*
For LLC Application and Filing Information
Alabama
Alaska http://www.gov.state.ak.us/ltgov/
Arizona http://www.azsos.gov/
Arkansas http://www.sosweb.state.ar.us/
California http://www.sos.ca.gov/
Colorado http://www.sos.state.co.us/
Connecticut http://www.sots.ct.gov/
Delaware http://sos.delaware.gov/default.shtml
Florida http://www.dos.state.fl.us/
Georgia http://sos.georgia.gov/
Hawaii http://hawaii.gov/ltgov/
Idaho http://www.idsos.state.id.us/
Illinois http://www.sos.state.il.us/
Indiana http://www.in.gov/sos/
Iowa http://www.sos.state.ia.us/
Kansas
Kentucky http://www.sos.ky.gov/
Louisiana http://www.sos.louisiana.gov/
Maine http://www.state.me.us/sos/
Maryland http://www.sos.state.md.us/
Massachusetts http://www.sec.state.ma.us/
Michigan http://www.michigan.gov/sos
Minnesota http://www.sos.state.mn.us/home/index.asp
Mississippi http://www.sos.state.ms.us/
Missouri http://www.sos.mo.gov/
Montana http://sos.state.mt.us/css/index.asp
Nebraska http://www.sos.state.ne.us/dyindex.html
Nevada http://sos.state.nv.us/
New Hampshire http://www.sos.nh.gov/index.html
New Jersey http://www.state.nj.us/state/
New Mexico http://www.sos.state.nm.us/
New York http://www.dos.state.ny.us/
North Carolina http://www.secstate.state.nc.us/
North Dakota http://www.nd.gov/sos/
Ohio http://www.sos.state.oh.us/
Oklahoma http://www.sos.state.ok.us/
Oregon http://www.sos.state.or.us/
Pennsylvania http://www.dos.state.pa.us/dos/site/default.asp
Rhode Island
South Carolina http://www.scsos.com/
South Dakota http://www.sdsos.gov/
Tennessee http://www.state.tn.us/sos/
Texas http://www.sos.state.tx.us/
Utah http://www.utah.gov/ltgovernor/
Vermont http://www.sec.state.vt.us/
Virginia http://www.soc.state.va.us/
Washington http://www.secstate.wa.gov/
Washington, DC http://os.dc.gov/os/site/default.asp
West Virginia http://www.wvsos.com/
Wisconsin http://www.sos.state.wi.us/
Wyoming http://soswy.state.wy.us/
· Please Note – Some states do not have a Secretary of State. In these cases, duties of the Secretary of State are carried out by the Lt. Governor. This includes application and/or filing of LLCs
1 Comment »
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Nice piece on LLC’s. Just wanted to add a couple points from the mortgage side. Forming an LLC can invoke the due-on-sale clause included in many loan docs. Historically, most banks do not take this action, however, some are tightening the standards. This is especially true if you get behind on your payments.
Another thing to think about is refinancing your loan. If the property is held in an LLC, many lenders will require it be taken out of the LLC for 6 months (a seasoning period) prior to condidering a refi.
As always, it is best to consult an attorney to get professional counsel and to clarify options, risks and rewards. An insurance professional can also be handy in providing alternative liability protection instruments.
Comment by Gene Urban — April 29, 2009 @ 1:35 pm