Questions on LLC

[Kevin S.]

Hello everyone, new to RE investing and looking to create a LLC. What's the best way (and economical) to set up LLC? My accountant? Attorney? Can I use Legal Zoom? I got a quote for $695.00 from an out of state accountant (someone I found from a RE book!). Is that typical fees? Legal Zoom is little confusing with various choices and levels. What need to be done on annual basis? Does it have to be done by a professional or can I do it? Are there any additional cost/fees once it is set up? I believe I need a EIN for every property and each LLC. How do I get EIN? Anything else I don't know? Thank you and appreciate any input.

[Benjamin Aaker]

Hi Kevin, and welcome to the forums. I'll assume you are firm in your decision to set up an LLC. LLCs are about managing risk and they help you limit but not get rid of liability. I use them for all my rental properties and recommend people do the same, in general. I typically have up to 10 properties or $1M in each LLC. The biggest benefit is that losses from one are unlikely to spill over to another one. As you can see from @Bruce Woodruff's post, not everyone agrees with setting up an LLC. I don't want to speak for him, but many would say in your first or first few rental properties, you don't need to set it up. If your net worth is low, I agree. Otherwise, I don't.

If you are doing a single-member LLC (just yourself and no partners), you should be happy using Legal Zoom. I've done this in the past. Once. Do the lowest level and don't have them file for you. You can figure that out with the secretary of state. Since my first time, I set up my own LLCs myself. If you will be having any partners other than your spouse, I recommend a local attorney, because the risk is much higher. I estimate $1,000 in fees with a traditional attorney. It's worth it.

EINs are needed for each LLC, not each property. When you get the LLC set up with the secretary of state, you'll be able to go to the IRS website and apply for your EIN. It's easy and takes 15 minutes. And stupifyingly, it's completely free. Use the EIN to get a bank account set up.

Good luck and feel free to ask additional questions.