Setting up LLC in Houston, tx questions?

Question

Hello Biggerpockets community,

I am setting up a single member (my husband and i) llc for myself, llc will only be used for managing one long term rentals property. Do you recommend I use myself as a registered agent or company that provides that service? Do i also need an operating agreement for LLC since it’s a single member llc? Does anyone have a word format of operating agreement that you are willing to share? Are there any good lawyers and CPE in houston that you can recommend?

Thank you

Ethan G. · Answer

It depends on how much you care about having your home address on a public document.  Some of my clients care a lot, others don't.  By the way, if someone just spends a few minutes on google, they can figure out your home address.

Yes, it would be good practice to have an operating agreement - usually banks and title companies would require it, even if you are the sole member.

I am an attorney and can refer you to my CPA (I assume that is what you meant and not CPE)

Cody L. · Answer

Know what I did?  Went to the secretary of state page in TX, got my LLC myself ($130 online fee).  Put myself as reg agent.  For my operating agreement I googled "Operating agreement template".   I've used that same one for ~30 LLCs on ~$200m of real estate.Know how much I've spent on attorney fees or CPE?  $0.   Hell, I don't even know what a "CPE" is. I think a lot of people over complicate things.  Focus on what's the REAL part of the business.  You're buying a property for $x, your bills are $y.  Your rent is $z.  You need $z-$y to be enough to justify spending $x (or whatever % of $x you had to put down)All the rest (LLCs and crap) is just noise.

Cody L. · Answer

It's not like I never use an attorney. I have an attorney that I've used for a few years.  We reach out to him a few times a month for various issues.  But honestly when it comes to getting an LLC, it takes me so little of my time that it's just not something I'd reach out to him for. Hell, with the time I've spent on these replies, I could have registered 1/2 dozen LLC's and EINs :)I even emailed my buddy a "cheat sheet" so he could click though the menus faster than I did my first time.  For anyone looking at this in the future, if you want to get an LLC in Texas, this is how:First you have to get your certificate of formation / filing from Texas Secretary of State...1) Go to http://www.sos.state.tx.us/2) Go to "Business Filings -> SISDirect - Online Searching and Filing.  Login (via new account or previous.  Either way you'll likely need to put in a CC# before proceeding)3) Go to "Business Organizations', then under "Web Filings" choose "Domestic Limited Liability Company (LLC)"  (or different, if applicable)4) Filing type -> Certificate of Formation (should be the only one)5) Fill out your info.The cost should be $300.  Make sure forms they give you are saved as PDF to your machineNext you have to get your EIN from the IRS.  That's easy and free. Google "IRS EIN" for the link or go to https://sa.www4.irs.gov/modiein/individual/index.jsp (current link today)   Remember that every year you have to file a "no tax due" or your account becomes in bad standing (that happened to me once when I forgot).   That's done here: http://comptroller.texas.gov/taxinfo/franchise/webfile_franchise.html  IMPORTANT:  To do it online you'll need your taxpayer number (which is public and will be on the forms you've got from the steps above), BUT ALSO YOUR WEBFILE NUMBER.  That number is ONLY mailed to you (paper mail, like the 1800's).   So when I get them I have a database of all my LLCs, what their taxpayer numbers are, and then wen I get that letter I add the webfile number and recycle the paper.  But make sure that webfile number is saved.  If you lose it you have to call them (sucks) and ask them to mail it to you (1800's style)Then, after all that, if you're looking to move property into an LLC, what *I'VE* done is had a title company do it ( though there might be other ways.  He charges me like $75 or so.   WARNING:  Technically, deeding a property to a new LLC could trigger a 'due on sale' and the bank that holds the note COULD decide to call the note due.  I don't think they ever would unless the note had some other issue but it is a possibility. Good luck!Cody

Basit Siddiqi · Answer

@Ivy MarkovMost registered agent companies provide bear minimum services. Some collect your mail and upload it to a portal for you to view. I would just say do it yourself if possible especially if the LLC is created in a state where you reside in.You may want to reach out to @Michael Plaks if you are looking for a tax professional within Houston / Texas.Best of luck

Ronald Rohde · Answer

No worries, looks like a full time job managing those entities. If it works for you, keep on. Lawyers also provide value by helping people do things they can't do or don't have time to do properly.

At your level isn't it cheaper to pay a lawyer $300/hour versus your hourly rate?

Ronald Rohde · Answer

Can you tell me how you filed an LLC in Texas for $130? Filing fee is $300 or ($308.10) with credit card. If thats truly what you paid, I'd be worried you don't have an LLC at all.

https://direct.sos.state.tx.us...

Jerel Ehlert · Answer

...

Laws on business organizations vary WILDLY from state to state.  So do laws on real property.  What CA does/doesn't do is not the same as TX, NY, or DE.  Chances are, if you Google any rando operating agreement for large company, it's based in DE law with a 1st runner up of NY.  Those operating agreements will not match 100% to CA or TX law.  If you forego an operating agreement, in TX you are using the default rules under Texas Business Organizations Code (specifically, Sec. 101).

In TX, the SoS fee to register an LLC is $300 +/- rush fees, name search fees, and card processing.

I'm sure many agree that spending much time on setting up business entities is a waste of time (noise).  Sometimes it does get overcomplicated.  A single member LLC to manage a few rentals with a combined value low enough to be comfortable...probably not all *that* complicated.  But involve ANYONE else, have employees, atypical operations....you better darn sure get a real lawyer involved.

btw, google searches = "full employment for lawyers and accountants"  It might be a good place to get a foundational understanding, but unless your goal is to become a lawyer, seek out a professional in your jurisdiction.  When seeking medical advice, I go to a medical professional.  Law isn't any different.

Ryan Chatman · Answer

@Ivy Markov yes you can act as your own registered agent with no problems. You'll save yourself on fees doing this. Like @Ethan G. Mentioned, you'll have to list your physical address on the docs if you are the registered agent.

I would also +1 on creating an operating agreement and also create articles of incorporation which will be on file with the state. Operating agreement is an internal doc banks and companies that you work with will want to see. Articles of incorporation are generally public and define the setup of your LLC. Although I am in business with my wife we still have these documents set up.

I am a big fan of NOLO's books on LLCs, Tax, and incorporating. They are straightforward and informative. These will save you on lawyers fees until you get to a point where you'll want to invest in an attorney for lock-tite documents that create corporate veil protections.

This is a great bundle which will help your knowledge on LLCs and Tax:

https://store.nolo.com/products/nolos-start-and-run-an-llc-bundle-lopbun.html

Most of these books should also be available at your local library if you want to save on paying for them :-)

The biggest benefits in doing your LLC to start will be for tax purposes which a good CPA or tax planner can help you with.

PM me and I'll share some docs that I have with you!

More info on LLCs in TX:

https://www.nolo.com/legal-encyclopedia/texas-form-llc-31745.html

Cody L. · Answer

PRO TIP!Keep track of all that info in an XLS.  You'd be shocked how often I have to reference.  Esp when a bank says "Can you get me financials on ABC LLC".  I don't even have each LLC -> property memorized.  So this helps a lot.  Sorry for so many black bars.  I have no idea what might be 'bad' to have out there.

Cody L. · Answer

My mistake.  $300.  See below.  As you can see I've done this a billion times.  But I appreciate the concern.

Setting up LLC in Houston, tx questions?

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