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How to Form an LLC as a Real Estate Agent

Ready to take the next step and make your real estate business official? This guide demystifies the process with a step-by-step process.

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Smart real estate agents have figured out it makes sense to incorporate or form an limited liability company (LLC) to protect themselves from potential liability and take advantage of the immense tax benefits. One of the chief reasons why new realtors sometimes fail to incorporate is that they just don't know what they're doing. Most people don't spend time reading up on business association law just for kicks, so they are unfamiliar with what it takes to actually get their LLC up and running.

So what should a real estate agent do if and when they want incorporation?

Here are five steps to follow to get started:

Step 1: Research the rules for setting up an LLC in your state

The Small Business Administration (SBA) will undoubtedly have information about how to set up an LLC in your state. The rules can vary from place to place, so it's important to familiarize yourself with the requirements. This will give you the basic overview of the steps you need to take. It can also give you a sense of the costs of setting up an LLC so you can be prepared for this.

Step 2: Choosing a name

If you're just an agent out on your own, it doesn't really matter what your official business name happens to be. You can go by your individual name one day and use a business name later. However, if you're going to form an LLC, then you need to have a registered business name.

Think about a name that will get across what you do for clients. Choose a name that sounds professional and memorable. You can change your business name after your incorporate, but it’s a difficult process so it’s better to make sure it's something you're comfortable from the start.

Step 3: Filing articles of incorporation

Perhaps the most important step when setting up your real estate LLC is to file the articles of incorporation. This means going to the LLC office in your state—which will usually be through the Secretary of State—and downloading the articles of incorporation form.

In almost every case, the articles of incorporation will be a simple form that you can fill in online. Given that your real estate business is likely to be quite simple, you probably won't have complex documentation to fill out in addition to this form. It will give the state basic information on you, your business and its purposes.

Step 4: Creation of an operating agreement

LLCs should have an operating agreement in place, even if they do not have to file this with the state. An operating agreement is the general outline of what your business will be about. It will outline your methodology for choosing the managers in your business and how you intend to distribute the profits. Given that most realtors setting up an LLC will be the sole owners and operators of the business, the operating statement may simply attest to this fact.

Step 5: Find out whether an intent to file is required in your state

In some states, you will have to supplement your state application with a posting in a local newspaper. This posting gives the public notice of your intent to begin doing business there. This is not required in every state, and it has been going out of favor across the country. It is still required in some, however, so check to see if you have to publish this. The Secretary of State in your state should have more information on the requirements for this posting.

In most states, your LLC is good to go once the articles of incorporation are accepted by the Secretary of State or LLC office. You will typically receive notice from them that the articles have been accepted. This may come with a notice of licensure that you can display in your office. As a real estate agent, you may be required to also sign up for various business licenses, but these are separate from the LLC you have formed. Your LLC will go into effect immediately upon filing with the state, so you can begin to reap some of the benefits of this incorporation right away if you get on the ball.

Ready to take the next step for your real estate business? MaxFilings helps you incorporate with confidence. Check out our Real Estate Incorporation Guide for even more helpful tips.

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