Investing in real estate can be a great decision, leading to reliable, recurring income. If you’re looking to invest in Florida real estate, though, it’s essential not to rush. There are several factors and options to consider to make the best choices. Many people find that creating a Florida LLC for their real estate investments can be a valuable approach, providing both financial and legal benefits.
So, how do you create an LLC in Florida to invest in real estate? Here’s a step-by-step guide to help you navigate the process effectively.
How to Create an LLC for Florida Real Estate Investments
Follow these steps to establish an LLC for real estate investments in Florida. While the steps remain relatively consistent, minor differences may apply depending on specific factors.
1. Name Your LLC
Choosing a name is the first, and perhaps simplest, step. Make sure the name is unique and not already in use by another registered business in Florida. Check the Florida Department of State’s online database to confirm its availability.
2. File the Articles of Organization for Your LLC
The Articles of Organization formally register essential details about the LLC, such as its name, street address, mailing address, and registered agent. This information is entered into the public record, creating transparency.
Additionally, list everyone authorized to manage the LLC. While this step might appear complex, it’s straightforward with accurate information.
3. Pay the Filing Fee
Currently, Florida charges a filing fee of $125, which covers both the LLC filing and registered agent fee. Additional fees apply if you want certified copies or a certificate of status.
4. Create an Operating Agreement
Although not required, an operating agreement is recommended as it helps prevent potential legal issues. The agreement details the LLC’s structure, including management roles, responsibilities, and members’ rights.
With an operating agreement, you establish a formal framework, which third parties may find harder to challenge if they attempt to hold you liable for the LLC’s obligations.
5. Get an Employer Identification Number (If Needed)
If you plan to hire employees or be taxed as a corporation, you’ll need an Employer Identification Number (EIN) from the IRS. Once submitted, your EIN will be issued promptly if there are no issues.
6. Register With the Department of Revenue (If Needed)
If your LLC sells goods or collects sales tax, it must register with the Florida Department of Revenue. To do so, complete form DR-1 (Business Tax Application), which requires basic LLC activity and demographic information.
7. Get the Business Licenses You Need
Generally, investing in Florida real estate doesn’t require a business license. However, if you’re working as a real estate agent, a license is mandatory. Depending on your business activities, additional licenses may also be necessary. Consulting a Florida real estate lawyer will clarify any specific licensing needs.
8. File Your Annual Report
Once operational, LLCs must file an annual report to confirm that the Articles of Organization remain accurate. The current filing fee is $138.75, but it increases by $400 if filed late. Timely filing helps avoid penalties and ensures your LLC’s good standing.
Factors to Consider
Your LLC’s structure and goals may influence certain decisions. Here are some important considerations:
Is it a Single-Member LLC?
If your LLC has only one member, it’s considered a Single-Member LLC (SMLLC). As the sole member, you retain full control over operating rules. An LLC structure still provides corporate protections, which are valuable in certain legal scenarios.
Why Set Up an LLC If You’re the Only Member
Creating an LLC will limit your financial liability. If there’s an unexpected problem with any of your investments, your personal assets won’t be at risk. It essentially serves as a risk management tool so that you can invest with a level of protection.
Should You Create an LLC for Each Property?
Creating a separate LLC for each property offers enhanced protection. For example, if an accident occurs on one property, claims are limited to that LLC’s assets only. With multiple properties under one LLC, all properties could be at risk. Though setting up multiple LLCs may require additional time and funds, many investors find the extra security worthwhile.
Make Sure You Understand Relevant Laws
Before investing, determine the specific activities you plan to pursue. Some, such as short-term rentals (e.g., Airbnb), are subject to heavier regulation. Verify local laws to ensure compliance and avoid penalties. If required, obtain additional licenses, such as a short-term rental license. A Florida attorney can help identify your legal obligations based on your activities.
Investing in Florida Real Estate as an LLC
You could make a lot of money by investing in Florida real estate, and you may want to register an LLC to do so. You need to go through a process to set it up, but the protection it offers is well worth it. You may even want to create multiple LLCs if you’re investing in more than one property.
Boyer Law Firm is a leading law firm in Florida that has plenty of experience with real estate. We focus on clarity, technology, and commitment and have been in business for over 15 years. Contact us today for professional guidance on your real estate investments.