So, you want to start a real estate business, but don't know where to start? In our post on 'Factors to Consider Before Starting a Business' we want to stress the importance of planning and preparation when it comes to creating a business. It's vital to consider what business model best suits your needs and connect with businessmen in the same field to learn more about what you're getting into. If you've done all this and are set on starting a Limited Liability Company (LLC), then read on. We'll be detailing the five steps you'll need to take to get started.
1. Do some research on local regulations
The requirements for starting an LLC vary from state to state, so the first thing to do is research the specifics. You can choose to form an LLC in your home state or opt for a state with business laws that better suit your needs and methods. Just note that if you plan to set up a real estate business in a different state, this requires registration as a foreign LLC. You can find out all about these requirements on your Secretary of State's local website.
2. Decide on a business name
When it comes to LLCs, the company is required to have a unique business name that is not used by any other business in the state. So, write down a couple of potential candidates before checking their availability. If you've done your research, you should know the local guidelines involved in naming your LLC. But there's one general rule that is present across all states. The advisors at ZenBusiness outline how an LLC needs to have "limited liability company" or an abbreviation of it at the end of the business name. Take note that accepted abbreviations vary depending on the state. Make sure to consider all of these when choosing a name, because overlooking even one guideline could result in a rejected application.
3. Prepare the necessary documents
Next, you'll need to file your articles of organization and create an operating agreement. Articles of organization usually need to have your business's name, mailing address, purpose, and a list of its members. Note also that this document can be referred to as a certificate of formation or certificate of organization in certain states.
As for the operating agreement, this isn't always a requirement, but it's still good to have one. It's a legal document that provides the specifics of ownership and the guidelines for making management decisions. While you might not be required to pass it to the Secretary of State with your articles of organization, we recommend that you keep it safe, as it's a useful tool for preventing misunderstandings and resolving conflicts between colleagues.
4. Apply for an Employer Identification Number (EIN)
Once you're done with the first three steps, you should consider registering your LLC with the federal government. Doing so allows you to have multiple partners and employees. Fortunately, the Internal Revenue Service offers an online service for EIN application. Just fill in the application forms with accurate data, then send it to the system. Once the information has been validated, your EIN will be issued.
5. Obtain the required business licenses and permits
Before you get your business up and running, you still need to apply for the relevant licenses and permits. This, once again, depends on the state where you're setting up shop. Real estate LLCs often need a general business license, a professional license, sales permits, and zoning permits. You'll need to obtain all of the required ones before you begin operations to avoid legal problems.
Those were the first five steps to get your real estate business on its feet. Once your LLC is all set, the next thing to do is scout for a property you can utilize. Investopedia cites 10 key considerations when choosing rental properties, including the neighborhood, nearby institutions and amenities, as well as the average cost of rent in the area. Getting into real estate can prove to be a profitable endeavor, but only if the business is handled well. So, make sure to put a lot of time and effort into starting on the right foot.