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The good news is that forming a real estate LLC is remarkably similar to creating any type of LLC. Check out our full guide on forming an LLC to see these steps in more detail.
1. Decide on Your Name
Consider including words like “real estate” or “properties” in your name. It will also need to include the designator “LLC” at the end.
There are certain words that you’re not allowed to use in an LLC name unless you get special permission from your state. As an example, you can’t use the words “mortgage” or “investment” in New York unless you run a financial services LLC. The term “urban development” is banned completely.
Finally, once you have the perfect name, you’ll need to make sure it’s not already in use. Your local secretary of state office should have a database of business names in your area you can check with.
2. Choose the Registered Agent
A registered agent manages the legal documentation for the LLC. Make sure you choose someone responsible for this position who lives in the state where you’re forming the LLC—it’s possible to choose yourself, an employee or a third-party company.
3. Create Your Articles of Organization
The articles of organization—sometimes called the certificate of formation—outline the finer details of your LLC. It includes things like your name, purpose and how you plan on managing your real estate business.
Fill out this state-specific form, have all the business owners sign it and file it with your state. In some states, such as New York and Nebraska, you’ll need to publish an ad in the local newspaper to let people know about your new LLC before you submit your paperwork.
4. Create an Operating Agreement
While the articles of organization lay down the basic information of your business, the operating agreement goes more in-depth. It fine-tunes how your business will be run, including:
Profit distribution
How investors can get out of the LLC
How the business will be funded
It’s not always a legal requirement to create an operating agreement, but it’s still a good idea to outline all of this so you don’t have disagreements with your partners later.
5. Follow Other State/Federal Requirements
Filing your LLC documentation is just the first step in being ready legally to buy properties as a separate entity. You’ll likely also need to get a general business license, apply for an employer identification number (EIN) from the IRS and file annual reports on the state of your business. These requirements typically vary by state, so check your state’s website for more information.
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This article was originally published by a www.forbes.com . Read the Original article here. .