As we have never been through this process, any recommendations or best practices would be greatly appreciated. 

The level of education, not to mention the high ethical standards enforced within the group, speaks for itself.We have a community of over 10,000 members committed to ethical business practices, and there is accountability for those who do not follow safety standards or ethics.

@Ye Tun AungTypically, formation of a business entity is in the realm of attorney work, and though some CPAs will handle it, it probably falls under the "unauthorized practice of law," at least in CA, which carries possible heavy penalties with it. 

Look into some basic marketing practices.

Now, in the practice of real estate, it's a constantly changing and shifting thing.

Written by attorney investors, it's full of practical advice about the management of investment property, has sample forms that can be edited, and - most importantly - tells you what your primary state laws are and where you can read them.

The answer in practice may be somewhere in between (?). 

Many lenders want to see insurance in place as part of their "underwriting"Are all hard money lenders participating in this chicken vs egg challenge or are there some that use common sense and have adjusted their practices to accommodate the various laws throughout the nation?

Like many (most) businesses it requires an investment of capital; money expenditure for ongoing marketing; management of operating, marketing and professional personnel; keeping accounting records and filing tax returns; established sales practices; constant monitoring of goals, budgets, and productivity; establishment and implementation of operational systems; and providing customer service.  

On a practical basis I don't see why someone would do the split and sell.