Cover Your Assets: How to Use Corporate Compliance to Keep Your LLC Legal
In real estate, there are many ways we can structure our deals, businesses, and contracts. Corporate compliance may look a little different for each person, but there are general requirements to meet across the board. It can be a hassle to maintain compliance, but these entities can protect you should you ever end up in a lawsuit.
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The field of compliance is concerned with ensuring any legal entity you use, especially a company like an LLC, series LLC, corporation, or even Delaware statutory trust, is playing by the rules our friendly state and federal governments require us all to play by. You're going to have to face this issue to responsibly manage your real estate company. Fortunately, you've got plenty of options for how to knock out your corporate compliance obligations.
Corporate Compliance Services Explained
Anyone who runs a company is responsible for complying with state and federal law. So, the word “compliance” actually has a broad meaning. In the world of real estate, where most of us use a form of corporation, LLC, trust network, or combination of entities and trusts, compliance has come to include many services.
Some of the most essential types of compliance services include:
- Registered agent services for investors with out-of-state entities.
- State income tax management. Even states that lack one, like Texas, sometimes require a “No Taxes Due” form to be filed regardless. Somebody has to do it.
- Federal laws, including tax filing.
- Document filing services.
- Entity-specific requirements.
- Ensuring all legal forms are filed on time and completed properly.
How to Vet a Corporate Compliance Provider
Of course, I have to warn you there are some opportunists in the world who run bogus, online-only businesses. All sorts of pop-up businesses tend to form out of nowhere, especially around tax season. This is why vetting your legal compliance professionals is a critical part of securing these crucial services.
Sometimes you may find a service does one thing exclusively. This sometimes happens with registered agents, for example. When you need a registered agent alone, you can go to a business that does nothing but offer such services. This is great if all you need is the registered agent, but if you need additional support, such a solution would only partially address your needs.
Law firms, of course, have the names of attorneys whose licenses you can quickly check online. Usually you can learn all about the lawyer, their practice areas, and a bit about who they are in and out of the office from a quick Google search.
If you aren’t working with a law firm, figure out who’s in charge, what experience they have, and exactly what they’re offering. If you can’t? That’s a bad sign. Take a look at another service provider if you strike out with one.
Deal-Hunting: Look For Bundles and Discounted Compliance Packages
People love to get my thoughts on the best ways to get the most bang for your buck in different areas of legal services. Just as with other products, you can get deals on compliance services. What type will depend strongly on where exactly you’re shopping.
For example, maybe you’re like our friend “Julia,” a single family investor using a Texas series LLC to control seven investment properties in four states. Julia needs help with managing her series LLC, because she can’t be in seven places at once. She also needs help with handling third-party property management.
If Julia wanted my opinion, I’d say she’d probably be happy at a full-service firm. She could also likely find a good deal from a real estate attorney with compliance chops. Anyone can use that same advice and seek out bundled services from any reputable provider.
By the way, law firms aren’t the only ones that offer these bundles. While a personal attorney may be more likely to customize something for your needs, I have many clients who save on registered agents by ordering several years’ worth of service in advance. You can absolutely find deals on compliance that address your specific needs.
Deciding Whether Full-Service Corporate Compliance Is “Worth It” For You
There’s one simple reason that investors will consider a full-service corporate compliance package or firm offering. The reality is that these services save the investor a profound amount of time and hassle.
When you think about it, compliance is a problem that every investor must find a solution of some kind for. For those who work entire separate careers on top of investing, folks overseeing large portfolios or worrying about multiple properties at all, time and attention become more scarce. This is before you even consider the personal factors that influence how precious your time is.
Most of us have families or partners relying on us, but spending time with them can be just as important as financially providing for them. What is the dollar amount you would place on your working hours versus your personal hours?
With so much to do and only so much time to dedicate to our investments, many investors ultimately decide the smart call is to outsource corporate compliance. Sometimes this can be a task you delegate within a company. So, if you have a five-member LLC, you may be able to pay one LLC member to oversee compliance.
Most investors find that purchasing compliance is the most time-efficient way to get the job done. Opting to use a law firm familiar with investors’ needs or other firm exclusively devoted to corporate compliance is a great choice for anyone who wants to virtually guarantee the quality of their labor.
Hiring a professional provides the extra confidence most investors need. The knowledge that their business will be taken care of is a level of security many investors are happy to pay to not have to handle themselves.
There’s More Than One Right Way to Handle Compliance
If you own a company, even just for managing real estate, compliance will become an issue for you. Now you know you have a few orders of business to address and a few different ways to get these jobs done. What system will work best for your business may take a bit of trial, error, and stick-to-it-iveness to determine.
But hey, you’re an entrepreneur—we know you’ve got drive. So don’t slack on compliance. With so many solutions available for you to use, there’s no excuse for avoiding the topic.
Do you have any follow-up questions for me about corporate compliance?
Ask me in the comment section below.