Creating a Real Estate LLC through Legal Zoom

[Jonathan Pechmajou]

Hello -

As I want to do real estate investing seriously, My first Step is to create a Real Estate LLC for Tax benefits and legal protection.

I want to do this on Legal Zoom, in Florida (advice of my lawyer, he said don't pay for me to do it, you can do it with this website) , the package offers : 

1. Economy LLC : Preparting the article of organization, validating the entity name of the LLC ($79)

2. Operating Agreement, EIN and Licences ($199) [Operating agreement alone is $99, OP Agreement + EIN is $159]

3. They offer Registered agent for $249 / year but I wanted to go with Corporate Direct registered agent ($125 / year)

4. in Option : Legal protect where they can review some documents for you and you can have 30min calls with attorneys , Tax pros (30mins / month) , access to their library of forms and legal documents ($40 / month)

5. In Option : Total compliance package ($280 / year) to submit minutes  (company minutes to State compliance filings)

What do you guys think of this package, and which of the options is better for me to get started ?

I wanted to go with 1. 2 . 3 (Corporate direct) and the rest I will figure it out later if I need it or not

Any other Tips you recommend before forming the LLC ?

Thanks

[Basit Siddiqi]

@Jonathan Pechmajou

Hi Jonathan - How are you?
I am actually in the process of creating a Florida LLC(I made a submit this past Thursday).

1. You can check the status of your name using the 
http://search.sunbiz.org/Inquiry/CorporationSearch/ByName

Make sure the entity name you choose is not listed in the search. If it is, it is okay aslong as it is not listed as "active" or "inact/UA"

2. Operating agreement for $99 is a good deal.

3. You have the option of not requiring a registered agent since you live in the state of Florida. However, it you choose to use a registered agent, I seen prices less than $125 a year.

Some things above that may be left out.
The cost to submit the "articles of organization" to the state of Florida is $125
Furthermore, there is an annual report that needs to be provided to Florida Due May 1st. Florida has a cost of $150 to submit this report.

[Chris K.]

@Jonathan Pechmajou

For single-member LLCs, you could utilize a service Legal Zoom. Not a good idea for multi-member LLCs. 

Even for a single-member LLC, it may make sense to use an attorney if you never owned an LLC before. As an attorney, it doesn't take me too long to create the operating agreement and do the filings. Most of my time is spent on answering various questions from the client relating to the LLC and what they intend to do with the LLC. My goal is to make sure the client has everything he or she needs to start their journey. That's a slightly different scope of work than just forming an LLC and washing my hands.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

[Nick Rutkowski]

@Jonathan Pechmajou

It’s okay to use legal zoom starting out but as your business becomes sophisticated and more general partner join, you’ll have to upgrade to a lawyer.

[Sean Morrison]

As a general rule, your first step shouldn't necessarily be creating an LLC, it should be finding a deal. One deal probably isn't enough to necessitate an LLC unless it's a large commercial holding. Also, LLCs are pass-through entities, so they do not provide tax benefits.

[Jonathan Pechmajou]

@Sean Morrison

LLc provides tax benefits, I believe your statement is incorrect.

The pass through concept just means the income flows through my personal tax statement after deductions and loss have been taken out on the corporation.

There are huge tax benefits associated with management of the property through real estate such as :

Mileage tax deduction

Depreciation tax deduction

Startup tax deductions

Capex tax deductions

Repairs tax deductions

Reporting of loss

Etc ...

[Colleen F.]

@Jonathan Pechmajou you are entitled to these deductions regardless of an LLC with rental properties:

Mileage tax deduction/Depreciation tax deduction//Capex tax deductions/Repairs tax deductions/Reporting of loss. Startup tax deductions- (I am not really sure what you refer to with this one) but if these are business expenses you are also entitled to them without an LLC.

You can deduct in the year you put the property into service.

[Sean Morrison]

You don't need an LLC to get the deductions. You should nonetheless maintain separate bank accounts, and treat it like a separate business.

[Jason Rhodewalt]

@Jonathan Pechmajou how did it go with Legal Zoom? Any regrets?

[Raymond Latham]

I want to say hello to everyone, I Don't want to Miss a single head. I live in LaGrange Texas, and I want to dive Right in and become a rental real estate investor. But I don't know the first thing about putting a business together, now I was told that funneling my cash flow into a Roth IRA had limitations to the tune of $6,000 per year. So as far as I understand and LLC is the only way to go, unless I discovered different. I do not want to make a mistake, so if anybody can help me straighten this out so that I can get started I would so appreciate it.

[Bruce Lynn]

#1. Chances are LLC doesn't save you any taxes, but actually costs you money, because you now have to file extra tax returns.

#2.  Chances are it will not provide you much asset protection as 90% of the people I see set them up wrong and utilize them wrong.  For example commingling bank accounts, commingling addresses to save money, which maybe you have resolved with using an agent, signing the documents with their personal names, naming them wrong, etc.   To me a great attorney will help you navigate those things and help set you up right and give you advice that you don't get from DIY.   

#3. Have you thought about how you will get leverage with LLC. Most lenders want loans in your personal name, not that of LLC. There are lenders who will lend to LLC, but it may cost more than you planned to do that.

[Beau Watson]

@Jonathan Pechmajou

Creating your own LLC and getting an EIN number is super easy to do on your own. Do a little bit of research and jump in. There are also templates online for operating agreements. If you want to be a real estate investor you need to get comfortable researching and doing items like this for your self or all your profits are going to get eaten up by the services you pay for.

Just my two cents.