Starting a real estate business requires more than just finding great deals. Protecting your assets and establishing a solid business structure is essential. One of the first steps? Setting up an LLC (Limited Liability Company). It’s not as complicated as it might sound, but skipping this step can leave you exposed to unnecessary risks.
Let’s break down everything you need to know about forming an LLC so you can protect your assets and approach real estate investing with confidence.
Why You Should Never Do Business Without an LLC
Working directly with consumers without an LLC is a mistake. The protection an LLC offers is crucial, so avoid making deals under your personal name.
The only exception might be if you’re partnering with another seasoned investor who already has an LLC and handles all transactions through their entity. Even then, proceed cautiously. For direct interactions with buyers or sellers, your LLC should always be in play.
An LLC limits your personal liability. If something goes wrong—like a lawsuit—it separates your personal assets from the business. Without this wall of protection, your house, savings, and other assets are fair game.
Essentials for Setting Up Your LLC
Choosing a Name for Your LLC
Your LLC’s name is more important than you think. Here’s some advice to make it simple:
- Keep it clear and easy to spell: A name that’s overly creative or abstract can cause frustration when customers try to write it down or search for your site.
- Avoid long explanations: For example, mixing your name and someone else’s might seem unique but could become a hassle to explain every time. Example: Instead of “GrantShan Properties LLC,” opt for something plain like “Prime Homes LLC.”
Make it professional, memorable, and easy to communicate in one try.
Check Name Availability
Before settling on a name, make sure no one else in your state has claimed it. Most states provide an “entity search” tool via their comptroller or secretary of state website. If you’re in Texas, search “Texas entity search” on Google, and the official site should pop up.
You’ll also want to look for similar names. If your chosen name overlaps too much with another LLC’s name, your filing may get rejected.
Secure the Right Domain Name
Equally important is making sure your chosen name has a matching “.com” domain available. Consumers naturally type “.com” first, so avoid alternatives like “.net” unless absolutely necessary.
Tools like Hostgator or GoDaddy can help you check for available domain names. Hostgator is a great option for beginners because of its 24/7 support and ease of use. Plus, domains are usually cheap—around $10 per year.
Filing Your LLC: The Basics
Why You Need an Attorney
While it’s possible to file your LLC paperwork yourself, don’t. Attorneys ensure you get the full legal protections an LLC can offer, like the “corporate veil.”
The corporate veil legally separates you from your business. But sloppy or incomplete paperwork—like missing annual filings or initial documentation—can void these protections. If someone sues your LLC, they could reach your personal assets if your paperwork isn’t airtight.
Reach out to other investors or attend local real estate investing meetups to find recommendations for reliable attorneys in your state.
Get Your EIN
Your EIN (Employer Identification Number) is like a social security number for your LLC. Even if you don’t have employees, you’ll need it to:
- Open a bank account
- File taxes under your LLC
- Set up vendor accounts
Applying for an EIN is free. Go directly to the IRS website and follow their step-by-step instructions. Avoid attorneys or third-party services that charge fees for something you can do for free in minutes.
Opening a Business Bank Account
Once your LLC is official and you’ve got your EIN, it’s time to open a dedicated bank account for your business.
Instead of going to a large bank like Chase or Bank of America, opt for a local community bank. These smaller institutions are more likely to offer personalized service and understand real estate investors’ needs.
At a community bank, building a relationship with the staff is easier. Over time, you’ll find that lending, special requests, and account management can become much smoother.
Avoid Commingling Funds
This is one of the biggest mistakes new business owners make. Commingling funds means using your business account for personal expenses or vice versa.
If you stop at the grocery store and use your business card, or you pay for personal outings with business funds, it blurs the line between you and the LLC. This puts your protections at risk.
In a legal dispute, commingling is an open door for someone to pierce your corporate veil. Always use business funds strictly for business expenses.
Should You Worry About Logos, Websites, and Business Cards?
While a polished logo and website are helpful, they’re not critical when starting out. Many new investors waste valuable time obsessing over branding instead of closing deals.
If you want a logo, hire an affordable designer. An experienced designer like Shawn McCoy can create a professional logo for under $100. The process involves a few revisions but isn’t time-consuming.
For websites, consider using easy-to-set-up templates. Companies like OnCarrot specialize in real estate investor templates. Propelio is also planning to release website templates in the future, making setup a breeze.
That said, none of this is urgent. You don’t need a logo, business cards, or even a website to start doing deals.
Contracts Are King
Nothing matters more than having the right contracts. Marketing, negotiating, and finding deals all depend on a solid agreement in place. Don’t let distractions delay you.
Your priority should be:
- Setting up your LLC
- Getting your EIN and business bank account
- Finding deals and creating contracts
Everything else—like logos, websites, and branding—can wait.
Final Thoughts
Creating an LLC is one of the most important steps to protect yourself and your real estate business. Keep the process simple: pick a clear name, confirm it’s available, file with the help of an attorney, and get your EIN. Once your LLC is ready, open a bank account and stay disciplined about keeping personal and business finances separate.
Remember, building a business isn’t about perfect swag or fancy logos. It’s about taking action. Once the essentials are in place, shift your focus to marketing, finding deals, and building a solid foundation. Don’t procrastinate on the details when the real work lies in growing your portfolio. Go out and make things happen.
