If you’ve considered investing in real estate, such as rental properties, there are some potential risks that you assume as the property holder. In order to minimize personal loss because of these exposures, forming a real estate holding company (or LLC) is strongly advised by expert investors. Steven Taylor, Taylor Equities, is a family-run company that purchases apartment complexes and makes other property investments in areas around California. Because the Taylor Equities company handles the financial transaction, Steven Taylor (who founded the company) doesn’t have to personally absorb any of the financial risks that real estate investments bring. Here is how you can start your own LLC for real estate investment opportunities.
Choose a Name
As you prepare to set up your real estate holdings company, you will need a name. You can use your own name or come up with some other label, but you can’t use a name that is already on file as an LLC in your state. The name itself must end in a variation of LLC. You could use the abbreviation Ltd or spell out Limited Liability Company. Your state of residence will an LLC office, usually affiliated with the Secretary of State’s office. You may be able to check their online database to find if your desired name is already in use, or you may have to call them directly.
File the Paperwork
Once you have been given the green light to move ahead with your name, you will need to file the appropriate paperwork for your LLC. It is recommended that you use a real estate lawyer for this part, as an attorney can help you navigate the list of needed documents. You may be able to print the application directly from your state’s website and the instruction for filing the completed version. Before you can start, you will need to file for an EIN number. This can be done through the IRS website, and your application can be filed online as well. The number is your tax ID and is necessary for filing your LLC paperwork, paying employees, paying your taxes, and opening a business account. The number is usually generated as soon as you apply. Once you have that number, you can move on to filing the articles of organization with the Secretary of State’s office. This is a simple form that lists your company’s name, address, and members of the LLC. This document is also called the articles of incorporation.
Decide on Your Operating Agreement
If you are going to be the sole owner or member of the company, then you will have a very brief operating agreement. This is the document that will list any of the members working with the LLC, and it will define their roles within the company. There are several standard forms you could use, but each member must sign the form. The agreement should include the ownership and operations rules, the members’ percentage interests (share of the company), members’ responsibilities ad rights, management duties, voting procedures, and how profits and loss will be addressed.
Once your paperwork has been filed and your fees paid, your state will provide confirmation that your company has officially been formed and recognized. From here, you are able to move forward with investment purchases and other areas of real estate operations.