by Tony Pearl
In this article, you’re going to learn exactly HOW to form your first (or next) Corporation or LLC as quickly as TODAY!
Learning how to set up a business entity (Corporation or LLC) has probably made more people hold themselves back from really getting started with their real estate investing than I can possibly tell you. So make sure you read this article closely so that you can learn just how simple it will be for you to get this little challenge out of the way, once and for all.
We’re going to cover WHY it’s important to have an entity in the first place, along with WHAT you’ll need to form one, and the three main ways of HOW it’s done. One thing we won’t cover is which one you should form – Corp or LLC. Are you ready for this? Great! Let’s go…
Now, before we get into how to set one up, let’s first cover the reason WHY it’s a smart idea to have some sort of entity like an LLC in the first place.
It’s no secret. We live in a very litigious society, where anyone can sue anyone else for just about anything. We can thank those “wonderful” attorneys for that. Because of this, it should come as no surprise that if someone even thinks that you have money, and sees that you’re in business, guess what? It’s really not a question of IF but WHEN you’ll get sued. Especially if you’re in real estate.
As a general rule, you do NOT want to do business in your own name. Why? Because you make yourself an easy target. And because you put everything you personally own at risk if you do. Yes, that means your personal residence, your cars, your bank account, and even your wages if you’re still working a job.
Therefore, you’ll want to have some sort of entity you can use as a shield to absorb or deflect those potential lawsuits that can potentially come your way. When you do business as an entity such as a Corporation or LLC, you’re not jeopardizing your personal assets, because you’re doing business in the name of your business entity, not in your name.
Finally, there are usually some pretty decent tax advantages available to you when you have your own business entity. Naturally, you’ll need to consult with your qualified, licensed, investor-friendly CPA for more info. Got it? Good! Let’s continue…
What’s Needed To Make an LLC
It’s actually simpler than you might think. The first thing you’ll need to form your own business entity is a NAME for it, then you’re going to confirm that the name you picked is available in the state you wish to incorporate. Once that’s confirmed, you’ll register that name, file your paperwork, pay your fees, and you’re done!
Don’t worry, we’ll cover how to do those steps in more detail in this report.
Many states will require that you declare a Registered Agent. This is the person who will receive whatever paperwork the entity gets. Yes, this could someday include the papers for a lawsuit, but don’t let that scare you. The registered agent is not personally liable for a lawsuit. They just receive the papers. This registered agent could be you (the simplest way to go), or it could be anyone else. The only real requirement is that they need to live in the state that the business is incorporated.
Quick Tip: If for some reason you want to incorporate in another state than where you live, you’ll definitely need to have a Registered Agent IN that state. Those popular states that have privacy or tax advantages (I’m sure you’ve heard of them) will often have businesses that will be your Registered Agent for you for a nominal fee. If that’s what you want to do for whatever reason, just do a Google search for “registered agent” in that state.
Taking Your First Step
In order to create your own Corporation or LLC, you’ll first need to pick out a NAME for it. It could be anything, but I strongly suggest that you pick something that clearly defines WHAT your business DOES. Sure, it can be a cute and catchy name, but it should be obvious what you do and whom you serve first and foremost. An option would be to use the geographic area you serve. For example, if you’re buying & selling houses in the Dallas, Texas area, a good choice could be “Dallas Home Buyers” or “Dallas Home Solutions.”
A suggestion I have for you would be to take out a sheet of paper, and just brainstorm out as many ideas as you can. Keep writing until you can’t think straight. Then pick out the top five names you like the most. Set those names aside. We’ll need them soon.
The Next Step: Making Sure Your Name is Available
Now that you’ve picked out some good possibilities for your business name, you’ll need to make sure that it’s actually available. Someone may have already claimed that name for themselves! The way that you’ll check for this is revealed in the next part, which gives us the perfect segway to introducing you to the BIG part of this report…
The Three Ways to Form Your Business Entity
If you boil it all down, there’s really only THREE ways that you can actually create your Corporation or LLC:
Hiring An Attorney
So let’s start with that first one – hiring an attorney to set it up for you. This is usually the most expensive and time-consuming option, because you’ll need to first book a time with a qualified attorney who can handle this properly for you. And of course, you’ll need to pay them for their time. If you already have an attorney, they’ll probably be very happy to provide this service for you, because it’s usually extremely simple for them to create an LLC or Corporation for someone just getting started.
I would say that the best time to use an attorney for forming a Corporation is when your business is big and/or complex enough to warrant the expertise of a qualified attorney. The right one can assist in advanced strategies to accomplish whatever goals you may have. And the attorney would search to confirm that your business name is available or not.
Now, most people reading this will probably not have the need for such a deep and expensive level of service – especially if it’s your first time. For that reason, I usually like to recommend going with either the 2nd or 3rd options listed above.
Form It Online
Your second option – Using an online service to help you create your business entity is probably the best and easiest option. While there are fees involved, they’re usually pretty minimal, and well worth it when you consider the convenience.
There are several options at the time I’m writing this. Here are a few:
When you go to any of these sites, you’ll usually start off by picking WHAT KIND of business entity you want to form (C Corp, S Corp, LLC), then WHERE you want to form it (which state), and then what NAME you want to use. The sites listed above all differ as to what order those steps are in, but they’re all there. Of course, one of the very first things they all do is to search to see if your preferred business name is available.
The sites will also let you know what else is involved, what they do, and their fees. Usually, they’ll be able to handle pretty much everything FOR you – from checking to make sure that your business name is available in that state, to preparing and filing the paperwork for you in that state, to paying the state fees to for your entity – everything! All you do is pick your business name, state, type of business, who the members are, declare your business address (TIP: Use an address other than your home if possible), make sure everything is correct, and of course – pay the fees!
It really doesn’t get any simpler than that. And it only takes a few minutes. Naturally, the first time is always the hardest, and this is no exception. But the good news is that you’ll have help available to you through the site.
Do It Yourself
Ok, I told you there were three main ways to form your business, so let’s cover the third way now – Forming it Yourself!
This option is for the true Do-It-Yourself type person. I’ve actually done this myself many times, so I’m quite used to it. Like anything else, I’ve found that it’s only tricky to do the first time. After that, it’s as easy as pie. I’ll show you how it’s easily done, but I should also say that this should be your option only if you KNOW what you’re doing, and you have very simple needs for this. Ok? Here’s how it’s done…
The first thing you’d do is just Google something like “Form an LLC (or corporation) in STATE.” For example, Google “How to form an LLC in Florida”
…Or whatever state you want to use. Trust me, Google should bring back plenty of valuable information for you to use. Just don’t let that overwhelm or confuse you.
But what you’ll really be looking for is the search result that shows you what that state’s official website is, along with the appropriate link to get you started. Keep looking. It’s there.
Once you find and click on it, you should be taken to an official state page that has the information you need to set yourself up. I wish I could tell you everything you specifically need to do here, but since there are 50 states (plus Washington, D.C.), you’ll have to figure this part out on your own. If you can do it, great! If not, that’s what those websites I listed above are for.
When you find the right links, you’ll be able to do all the same stuff I had told you about earlier – you’ll be able to check on the availability of your chosen business name, usually right on the state website. You’ll be able to obtain and file your required paperwork. You should be able to upload those papers once they’ve been prepared and signed. Then you’ll be able to pay your fee to the state and be done. TIP: If you go this route, I recommend you pay the extra fee for expedited service. That way, you’ll get everything immediately, today! So it’s well worth it, whenever it’s available.
And just so you know, the “usual paperwork” for an LLC usually consists of Articles of Incorporation as well as an LLC Operating Agreement. I know. They sound scary. But they’re not too bad. You’ll see.
Which Way Should You Use?
Armed with this knowledge, you should already start to feel more confident about getting your business entity started quickly and easily. So which of those three options should you use? The answer is: It depends! I wish I could just tell you which way to go, but that would just not be right, because I don’t know what your situation is, what your expertise or experience is, or what your specific goals are for your business.
What I can tell you is that 80%+ of the time, you’re usually better off just using an online service to get it set up. They have ways of providing support built-in to their sites, and sometimes they have people ready to help you or answer your questions if needed.
The only time you might really consider doing it yourself is if you really know what you’re doing, and have very simple needs for this business entity.
Something else you might want to consider is that whatever you do, you can usually FIX IT LATER if you mess things up. So keep that in mind. And if you ever do need to fix things, you’d better fix them as quickly as you can before it’s too late.
A final tip to consider if you have any questions about taxes, privacy, and protection: You should get educated about these things so that you know what you’re doing and how to get maximum advantage for yourself and your business.
Going to the right seminars and having the right professionals on your team are integral. For example, you may want to consult with your qualified, real estate investor-friendly CPA before (or after) forming your entity. Then have a strategy and plan to legally claim every deduction you can.
Keeping Your LLC or Corporation
Congratulations! Now that you’ve formed your entity, you should know that you’ll need to consistently do certain things to keep it active and legal.
To begin, you’ll need to pay your yearly fees to the state. I know, what a shocker, right? This is another form of revenue for your state, and those fees can usually vary between $50-$800 per year. California has those high fees. Again, what a shocker. But you’ll need to know what these fees are, and be ready to pay them on time. Every year.
In addition to that, certain states have other fees and taxes, and those are usually tied in to your business’ revenue. Make more, and your state may want more. So be sure to familiarize yourself with these taxes and regulations for your chosen state.
Finally, there are usually requirements for filing your yearly paperwork for your entity. Make sure you know what these are and follow them, and you’ll be good.
What About a Bank Account or EIN Number?
Depending on what you do with your business, you may or may not need an EIN Number or bank account… But you will need an EIN Number if you DO get a bank account! To get an EIN Number is simple – just Google how to do it. HINT: You’ll need to fill out an IRS SS-4 Form.
You’ll want to have a bank account so that you can use it for your business and wisely separate your business expenses from your personal ones. So you’d simply need to bring your newly-created business paperwork with you, along with your EIN Number to the bank, and they’ll be more than happy to help you from there. TIP: It’s best to print out the EIN Number paper from the IRS and just take that with you to the bank.
Wow! Who knew that learning how to set up your very own LLC or Corporation could be so much FUN, let alone sexy, right?
But there you have it – you now know exactly what to do to get yourself started, right now – TODAY. And before you know it, you’ll be happily signing those contracts with the name of your entity and you as the agent. Look at YOU, big ballin’ and wearing your big-boy (or girl) pants! Did I mention that you’ll sleep better at nights, knowing that you have protection? Yeah, that’s a positive side-effect.
So now you have no excuse not to get started with your real estate investing. What are you waiting for? Go ahead and set up your Corporation or LLC TODAY, so you can start cashing those big checks tomorrow!
And I’ll see you at the bank.
Until Next Time,
Copyright 2020 Tony Pearl | All Rights Reserved
BIO: Tony Pearl is a writer, speaker, copywriter, coach, mentor, marketer, musician, poet, ballroom dance instructor, world traveler, father, fiance, internet marketer, voiceover artist, and real estate investor. He’s also a Politically-Incorrect Insomniac with ADHD who specializes in adding massive value to people’s lives by helping them overcome limiting beliefs, have more fun, and make more money while improving lifestyles through investing in real estate!
Today, you’re going to learn something SO important and powerful, so make sure you pay close attention…
One of the biggest challenges a lot of students or new investors face is how to build their dream teams. And one of the most CRUCIAL members of a real estate dream team is the right Real Estate Attorney or Title Company!
Let’s face it, if you don’t have the right legal representation on your side to help not only watch your back but also help you get your deals done properly, you’re screwed! But if you DO have the right one(s) on your side, you’re going to make a lot of money a LOT easier.
I thought this point was so important that I took the time to make a full TUTORIAL VIDEO for you!
Not only that, but I used a Mind Map to create it.
And you’re going to get it right now! Here you go…
Here’s a link to the Mind Map I used:
Watch this video! Take notes. Enjoy…and TAKE ACTION on what you learn here.
The RIGHT Real Estate Attorney (or Title Company) will MAKE your business.
The WRONG on will BREAK your business.
Ask me how I know this! 🙂
When It’s Time to Involve an Attorney:
It’s recommended that every deal should be closed with a real estate closing attorney – especially the ones that you’re staying in, because you’ll have an ongoing relationship with the seller…or the buyer.
So with all that in mind… why not use one?
When Specifically Do You Bring Them In?
When you’re Buying:
Lease Option: Right after you get the property under agreement, have them check the title.
When you’re ready to close the buyer.
Owner Financing or Option Deal: First, order the title to be checked immediately after getting the P&S Agreement (or the Option Agreement) signed.
ACTS: When you’ve found your buyer and are ready to do your simultaneous closing.
When You’re Selling:
Sandwich Lease or ACTS: Send your completed lease option agreement with the buyer & the signed agreement with the seller to them.
Option: Send the P&S Agreement from the buyer & Option agreement from the seller right after the buyer has given their deposit.
Pro TIP: Either Before or right as you’re closing your first deal, your attorney should look over your agreements & add any documents or make any minor alterations the feel are needed. Be patient, but insist on pushing through the deals in the way you want to do them. Remember that THEY work for YOU, but are there to help protect you AS you get your deals closed.
Thanks for watching & reading.
I hope this helps!