First time forming an LLC

[Gavin Wynn]

I am very new to the industry, to the point that I think I should start an LLC as a holding company. The local title company says I should talk to an attorney first, but I'm wondering if this is necessary. Can I go straight through the secretary of state? Or should I use a service such as Zenbusiness or Tailor Brands? Thanks in advance.

[Brian Poppleton]

To just form an LLC you should be able to figure it out. If your purpose is for legal protection I would consult an attorney. They will be able to draft everything to be legally sound.

[Jack Krusinski]

Hi Gavin. You should be able to create your own LLC by yourself. For my first LLC to save costs, I did it by myself. If I had to do it over again, I would hire an attorney to be safe. It costs around $1,300 or so, and I believe (at least for me) the peace of mind that it is done 100% correctly is worth it. I have a recommendation if you are looking for one.

[Jonathan Bock]

Quote from @Gavin Wynn:

I am very new to the industry, to the point that I think I should start an LLC as a holding company. The local title company says I should talk to an attorney first, but I'm wondering if this is necessary. Can I go straight through the secretary of state? Or should I use a service such as Zenbusiness or Tailor Brands? Thanks in advance.

 Holdco's for beginners... how many deals have you done?  

[Jonathan Bock]

@Gavin Wynn 

Not trying to be negative just don't want you to get stuck in the rabbit hole like countless others and then take no action.  

[Gino Barbaro]

@Gavin Wynn

I'm glad you are thinking about asset protection. In my opinion, it is something you should sit down with an attorney who provides entity protection, so you can map out what you're trying to achieve. On my first deal, I created an entity for that property. As I grew, my structure became more complicated.

Anyone can create a cheap LLC. But are you creating the right one, in the right state, for your objectives.

If you want an intro to who our community uses, DM me and I will put you in touch

Gino

[Gavin Wynn]

Quote from @Jonathan Bock:

@Gavin Wynn 

Not trying to be negative just don't want you to get stuck in the rabbit hole like countless others and then take no action.  

I only own 2 duplexes, live in half of my second once. 

[Cameron Green]

I own a couple of properties in Cleveland, and I had an attorney draft up my LLC for me. It wasn't too much money, and I always keep each house with finances separate in its own LLC but only have a few LLCs. It starts to become costly to create a new LLC for every house in Ohio. So I definitely recommend hiring an attorney, especially if you're new to the industry. It gives you peace of mind knowing everything is set up correctly and in compliance with local laws. If you need any contacts or recommendations, just let me know!

[Timothy Hero]

I always use ZenBusiness. Few hundred bucks and they'll handle everything for you and you'll receive the entity docs in 5 days or so.

[Remington Lyman]

Quote from @Gavin Wynn:

I am very new to the industry, to the point that I think I should start an LLC as a holding company. The local title company says I should talk to an attorney first, but I'm wondering if this is necessary. Can I go straight through the secretary of state? Or should I use a service such as Zenbusiness or Tailor Brands? Thanks in advance.

You can handle it yourself, but if you make a mistake, it will be costly in terms of money, time, and effort to rectify. That's why it's recommended to consult your accountant and attorney first.

[Evan Polaski]

@Gavin Wynn, why are you wanting to form an LLC?

Asset protection is an obvious reason for many, but if you are sued, in reality, the opposing attorney will do everything to get to you personally, anyways.  i.e. did you sign leases personally?  Do you have an outstanding mortgage in your personal name?  Are you using a personal Zillow account to list your properties for rent, or a personal email/cell phone to take tenant inquiries?  Not to say an attorney will be able to pierce the corporate veil, but they will certainly try, anyways.

I am an Ohio resident, and I did my own and my wife's directly though the secretary of state. I (we) have only been sued once on a property that was in my wife's LLC, and we settled before we found out if they other person was going to be able to pierce the veil of her LLC.

I don't mean to discourage you from forming an LLC, but there are real costs, beyond formation. Lending terms on properties owned in LLC tend to require more equity and higher interest. Some title companies will require an operating agreement, even if sole member, to buy or finance a property. Separate bank account, credit cards, signature blocks for every contract and document you are signing for LLC.

I have an LLC for my rentals, so I am 100% for them, as long as you understand what you are getting into. And in reality, while I have never had to test the strength of my LLC, if you are being sued, any half decent attorney will try to pierce your corporate veil anyways and try to get to you personally anyways. Again, very limited experience with this, but the one time I was sued, the attorney tried to connect social media posts on a personal account to bring personal exposure for a property that was held in an LLC. (We settled anyways because the settlement was cheaper than what my attorney bills would have been to defend against this absurd suit, so I didn't test the true strength of the LLC)

[Alfath Ahmed]

Quote from @Gavin Wynn:

I am very new to the industry, to the point that I think I should start an LLC as a holding company. The local title company says I should talk to an attorney first, but I'm wondering if this is necessary. Can I go straight through the secretary of state? Or should I use a service such as Zenbusiness or Tailor Brands? Thanks in advance.

 I second what @Remington Lyman is saying. You can make the LLC yourself but if you mess up and get sued for some reason, it will trace back to everything. I have my attorney make all of my LLCs and all of my clients that invest OOS.

[Keyona Taylor]

Quote from @Gavin Wynn:

I am very new to the industry, to the point that I think I should start an LLC as a holding company. The local title company says I should talk to an attorney first, but I'm wondering if this is necessary. Can I go straight through the secretary of state? Or should I use a service such as Zenbusiness or Tailor Brands? Thanks in advance. It's a good idea to consult an attorney before forming your LLC, especially since you're new to the industry. They can provide valuable guidance to ensure everything is set up correctly.

If you prefer a DIY approach, services like Zenbusiness or Tailor Brands can help, but they won't offer the same personalized advice.

Good luck, and feel free to ask more questions!

[Colby Fryar]

You can do it either way and of course it is always best to consult an attorney.  It will also depend on the state you are in.  I found it just as easy in my state to set it up on the SOS website and it was much cheaper!

Before jumping in to an llc, I would encourage you to start building relationships with team members, brokers, finding deals and underwriting deals.  Make sure this will be a fit for you first.
 

[Bob Stevens]

Quote from @Gavin Wynn:

I am very new to the industry, to the point that I think I should start an LLC as a holding company. The local title company says I should talk to an attorney first, but I'm wondering if this is necessary. Can I go straight through the secretary of state? Or should I use a service such as Zenbusiness or Tailor Brands? Thanks in advance.

 do you have a deal? If not do one or two 1st. 

[Taylor Kendrick]

Quote from @Evan Polaski:

@Gavin Wynn, why are you wanting to form an LLC?

Asset protection is an obvious reason for many, but if you are sued, in reality, the opposing attorney will do everything to get to you personally, anyways.  i.e. did you sign leases personally?  Do you have an outstanding mortgage in your personal name?  Are you using a personal Zillow account to list your properties for rent, or a personal email/cell phone to take tenant inquiries?  Not to say an attorney will be able to pierce the corporate veil, but they will certainly try, anyways.

I am an Ohio resident, and I did my own and my wife's directly though the secretary of state. I (we) have only been sued once on a property that was in my wife's LLC, and we settled before we found out if they other person was going to be able to pierce the veil of her LLC.

I don't mean to discourage you from forming an LLC, but there are real costs, beyond formation. Lending terms on properties owned in LLC tend to require more equity and higher interest. Some title companies will require an operating agreement, even if sole member, to buy or finance a property. Separate bank account, credit cards, signature blocks for every contract and document you are signing for LLC.

I have an LLC for my rentals, so I am 100% for them, as long as you understand what you are getting into. And in reality, while I have never had to test the strength of my LLC, if you are being sued, any half decent attorney will try to pierce your corporate veil anyways and try to get to you personally anyways. Again, very limited experience with this, but the one time I was sued, the attorney tried to connect social media posts on a personal account to bring personal exposure for a property that was held in an LLC. (We settled anyways because the settlement was cheaper than what my attorney bills would have been to defend against this absurd suit, so I didn't test the true strength of the LLC)

Interesting you went with an LLC for your very first property. If someone were to buy their first property without an LLC, how difficult would it be to roll that property into an LLC later?

[Remington Lyman]

Quote from @Taylor Kendrick:

Quote from @Evan Polaski:

@Gavin Wynn, why are you wanting to form an LLC?

Asset protection is an obvious reason for many, but if you are sued, in reality, the opposing attorney will do everything to get to you personally, anyways.  i.e. did you sign leases personally?  Do you have an outstanding mortgage in your personal name?  Are you using a personal Zillow account to list your properties for rent, or a personal email/cell phone to take tenant inquiries?  Not to say an attorney will be able to pierce the corporate veil, but they will certainly try, anyways.

I am an Ohio resident, and I did my own and my wife's directly though the secretary of state. I (we) have only been sued once on a property that was in my wife's LLC, and we settled before we found out if they other person was going to be able to pierce the veil of her LLC.

I don't mean to discourage you from forming an LLC, but there are real costs, beyond formation. Lending terms on properties owned in LLC tend to require more equity and higher interest. Some title companies will require an operating agreement, even if sole member, to buy or finance a property. Separate bank account, credit cards, signature blocks for every contract and document you are signing for LLC.

I have an LLC for my rentals, so I am 100% for them, as long as you understand what you are getting into. And in reality, while I have never had to test the strength of my LLC, if you are being sued, any half decent attorney will try to pierce your corporate veil anyways and try to get to you personally anyways. Again, very limited experience with this, but the one time I was sued, the attorney tried to connect social media posts on a personal account to bring personal exposure for a property that was held in an LLC. (We settled anyways because the settlement was cheaper than what my attorney bills would have been to defend against this absurd suit, so I didn't test the true strength of the LLC)

Interesting you went with an LLC for your very first property. If someone were to buy their first property without an LLC, how difficult would it be to roll that property into an LLC later?

You need to quickly claim deed it into an LLC. This process is not difficult to complete. Alternatively, you can hire a title company to assist you.

[Evan Polaski]

@Taylor Kendrick, as Remington noted, it is a pretty simple process.  

I will note, that it can become more complex depending on what contracts you have on the property. Generally, the point of the LLC is to protect your personal assets. House goes into LLC, but if you still have leases outstanding signed by you personally, that can open the door to maintain personal liability. Mortgages in your personal name on the property in the LLC, may be another route that an attorney can go after you personally in the event of a suit.

While I have never tested this, any good attorney will try to. You should certainly talk to an attorney about whether you are really creating any protection by moving rental into LLC.

[Gavin Wynn]

Quote from @Bob Stevens:

Quote from @Gavin Wynn:

I am very new to the industry, to the point that I think I should start an LLC as a holding company. The local title company says I should talk to an attorney first, but I'm wondering if this is necessary. Can I go straight through the secretary of state? Or should I use a service such as Zenbusiness or Tailor Brands? Thanks in advance.

 do you have a deal? If not do one or two 1st. 

 I own 2 multi-family properties. 

[Remington Lyman]

Quote from @Remington Lyman:

Quote from @Taylor Kendrick:

Quote from @Evan Polaski:

@Gavin Wynn, why are you wanting to form an LLC?

Asset protection is an obvious reason for many, but if you are sued, in reality, the opposing attorney will do everything to get to you personally, anyways.  i.e. did you sign leases personally?  Do you have an outstanding mortgage in your personal name?  Are you using a personal Zillow account to list your properties for rent, or a personal email/cell phone to take tenant inquiries?  Not to say an attorney will be able to pierce the corporate veil, but they will certainly try, anyways.

I am an Ohio resident, and I did my own and my wife's directly though the secretary of state. I (we) have only been sued once on a property that was in my wife's LLC, and we settled before we found out if they other person was going to be able to pierce the veil of her LLC.

I don't mean to discourage you from forming an LLC, but there are real costs, beyond formation. Lending terms on properties owned in LLC tend to require more equity and higher interest. Some title companies will require an operating agreement, even if sole member, to buy or finance a property. Separate bank account, credit cards, signature blocks for every contract and document you are signing for LLC.

I have an LLC for my rentals, so I am 100% for them, as long as you understand what you are getting into. And in reality, while I have never had to test the strength of my LLC, if you are being sued, any half decent attorney will try to pierce your corporate veil anyways and try to get to you personally anyways. Again, very limited experience with this, but the one time I was sued, the attorney tried to connect social media posts on a personal account to bring personal exposure for a property that was held in an LLC. (We settled anyways because the settlement was cheaper than what my attorney bills would have been to defend against this absurd suit, so I didn't test the true strength of the LLC)

Interesting you went with an LLC for your very first property. If someone were to buy their first property without an LLC, how difficult would it be to roll that property into an LLC later?

You need to quickly claim deed it into an LLC. This process is not difficult to complete. Alternatively, you can hire a title company to assist you.

quitclaim deed*

[Henry Clark]

Op

1.  Recommend you use your attorney. Make them the agent of record.  Your state will require a renewal every X years.  I would trash it in my mail.  

2. Your Operating Agreement is more important than the LLC itself and requires more thought. What happens if you die? Divorce? Incapacitated? One person want to sale? Dissolution? Etc etc.

3.  Don’t have an agreement note you can vote to not do distributions? Why? 
4.  Do you have a trust or when you wealth gets large enough? 
5.  Use the lookup.  My name and a post.  What happens if you die?  

6.  If you’re worried about liability?  Your first concerns should be your operating procedures and insurance.  Example: Why did you not rent to me?  Because I’m?????  Your operating procedures should handle that. 

[James Wise]

Quote from @Gavin Wynn:

I am very new to the industry, to the point that I think I should start an LLC as a holding company. The local title company says I should talk to an attorney first, but I'm wondering if this is necessary. Can I go straight through the secretary of state? Or should I use a service such as Zenbusiness or Tailor Brands? Thanks in advance.

You can do it on the state website. Filing fee is like $25 or something. Unless it's a multi member LLC it's a no brainer, a child could do it.

[Bob Stevens]

Quote from @Taylor Kendrick:

Quote from @Evan Polaski:

@Gavin Wynn, why are you wanting to form an LLC?

Asset protection is an obvious reason for many, but if you are sued, in reality, the opposing attorney will do everything to get to you personally, anyways.  i.e. did you sign leases personally?  Do you have an outstanding mortgage in your personal name?  Are you using a personal Zillow account to list your properties for rent, or a personal email/cell phone to take tenant inquiries?  Not to say an attorney will be able to pierce the corporate veil, but they will certainly try, anyways.

I am an Ohio resident, and I did my own and my wife's directly though the secretary of state. I (we) have only been sued once on a property that was in my wife's LLC, and we settled before we found out if they other person was going to be able to pierce the veil of her LLC.

I don't mean to discourage you from forming an LLC, but there are real costs, beyond formation. Lending terms on properties owned in LLC tend to require more equity and higher interest. Some title companies will require an operating agreement, even if sole member, to buy or finance a property. Separate bank account, credit cards, signature blocks for every contract and document you are signing for LLC.

I have an LLC for my rentals, so I am 100% for them, as long as you understand what you are getting into. And in reality, while I have never had to test the strength of my LLC, if you are being sued, any half decent attorney will try to pierce your corporate veil anyways and try to get to you personally anyways. Again, very limited experience with this, but the one time I was sued, the attorney tried to connect social media posts on a personal account to bring personal exposure for a property that was held in an LLC. (We settled anyways because the settlement was cheaper than what my attorney bills would have been to defend against this absurd suit, so I didn't test the true strength of the LLC)

Interesting you went with an LLC for your very first property. If someone were to buy their first property without an LLC, how difficult would it be to roll that property into an LLC later?

 100%