Real Estate LLC: What It Is and How to Set It Up

So, you operate a small business in these unprecedented times of pandemics. And it’s risky, of course. Would it be less risky if you opened another limited liability company? Can an LLC own another LLC? Is it even legal? In a nutshell: Yes. Not only that it’s possible and legal, but it’s an excellent idea, especially if you own several business lines. If you have multiple business ventures, and these come with various levels of risk, forming a subsidiary LLC for each of the ventures will minimize risk: If one of them fails, the assets of the others will be protected.But let’s start with the basics: What is a subsidiary? What do the terms parent LLC and subsidiary LLCs even mean? If you’re not familiar with these expressions, let alone with regulations and requirements, worry not; We’ll walk you through all the steps and explain all the pros and cons of this business umbrella structure. Also, we advise you to take a look at this list of LLC service choices.Types of LLCsA limited liability company or an LLC is a business entity that offers flexibility and simplicity. It can be owned by individuals, corporations, other LLCs, or foreign entities. The number of owners (called LLC members) is not limited, and most states allow single-member LLCs. But, how many LLCs can you have? And what are the benefits of having more than one?The number of LLCs one person can register is not limited. Similarly, an LLC can own multiple businesses, run as separate LLCs, where the holding LLC is the master entity.There are several types of LLC companies you can have: A single-member LLC (Sole Proprietorship) - has a single owner; A domestic LLC - operates in the country in which it was opened; A foreign LLC - does business outside of the country of origin; A professional LLC - for licensed professionals (usually doctors and lawyers) A series LLC - designates rights, obligations, and debts to smaller cells called series.How Can an LLC Own Another LLC?If you wish to register an LLC, you can do it on your own, or choose a cost-effective legal service to help you with the registration process. Essentially, there are three ways you can structure your business. First of all, you can create individual companies for as many businesses as you wish, as there is no limit. Pick a suitable name that hasn’t been registered, choose a registered agent, and file the Articles of Organization. Each business will count as a stand-alone entity. This option can be an excellent choice for real estate businesses. Secondly, you can create multiple DBAs under one LLC. In this case, the original LLC will not count as the LLC parent company. DBA stands for Doing Business As. It’s a kind of pseudonym for your business. Companies usually register additional business names because they want to operate under a shorter and more memorable name. Note that, by registering a DBA, you don’t create a new legal entity. If any DBA under your LLC is sued, the LLC is liable.The third option is to form an LLC holding company by putting multiple businesses under one LLC; Creating a subsidiary of an LLC, or multiple ones, instead of opening new LLCs is a good idea because each individual LLC, including the holding LLC, will be protected from the others’ liabilities. If you transfer your assets to the holding LLC, they will be out of reach of the subsidiary LLC’s creditors, while a lease agreement can be signed so that the subsidiary LLC can still use them.Once you go through all the possibilities and make a plan, we would advise you to find a bank to help your small business get on track.  Benefits of an LLC Owning Another LLCThe most significant advantage of this business structure would be minimizing the potential financial risk if one of your companies stumbles upon some bumps in the road. Once your subsidiaries are owned by a business entity that protects them, if any of them loses their value, it won’t jeopardize the master entity. And if one of the companies gets sued, others are safe from liability, which is a significant benefit.On top of this, opting for an umbrella structure benefits your reputation, too. Your LLC owned by another LLC is more likely to get a loan from a bank, especially if it’s a startup. Being a part of a larger company gives you access to better rates and terms for bank loans. By the way, if you have a bad credit score but want to start a small or medium-sized business, check this list of banks that offer bad credit business loans. Last but not least, each subsidiary has its own management, meaning that the holding company’s managers don’t need to manage them too. In fact, they don’t have to know anything about the subsidiaries’ day-to-day operation.Benefits of an LLC Owning Another LLCAs always, there are downsides to the parent-subsidiary LLC structure as well. Owning multiple small businesses means much more paperwork when launching the LLCs, filing forms, opening and maintaining bank accounts, tax documents, payrolls… It also means higher costs, because you need to pay filing fees for each LLC you open. Besides, creating a holding company and having subsidiaries won’t protect the subsidiaries from liability in case the parent company gets in legal trouble. Creditors might tap into the subsidiaries’ insurance coverage if the judgment exceeds the parent company’s insurance.  To sum it all up: An LLC owning another LLC represents a legal way of structuring your business but you should always consider all the possible benefits and disadvantages before restructuring your company in this way.

Your business name plays a monumental role in how your company is perceived. It’s the first thing your clients interact with, and getting it right is essential for branding success. As such, there are a number of good reasons that can prompt you to change your LLC name.  Sometimes a business name just needs to be modified to become more unique. Other times, the departure of a business partner or changes in the branding strategy may require adjustments. Every business evolves, and if you start experiencing an identity crisis, it’s only logical to consider a business name change. How to change the name of your LLC? Changing a business name can be frustrating, especially if you aren’t familiar with the procedure. For starters, bear in mind that if you have partners, you’ll need their written consent to make any name changes.  Each state has its own rules and regulations when it comes to LLC names. The process of changing your business name can be a little more complicated if your business operates in more than one state. Naturally, changing an LLC name will cost more if you do business in multiple states.  We created a step-by-step guide that thoroughly explains everything you need to know to complete your business name change. Of course, if this is something that you aren’t ready to do on your own yet, there is no shortage of legal services that can help you change your business name. Check available LLC names If you’re trying to figure out how to change your LLC name, the first step involves checking whether your new name is available in the state where your business operates. Business filing agencies allow you to conduct a search on their websites for free, but you can get the same information from the secretary of the state’s website.  It’s important to complete this step correctly and select a name that the state will approve. You cannot choose names that are similar to other LLCs. It’s also important to remember that your requested name can still be claimed by third parties until it’s officially approved and filed with the state. Approve a resolution to change the name of your LLC The next step is to get a written resolution that shows that all owners and members of your LLC agree with the name change. Each business should have an LLC operating agreement, a document that outlines how important decisions are made in the company. In some companies that process only involves two people, while others require all members to vote. Either way, having a proper operating agreement can speed up the entire process. This is also one of the main downsides of an LLC, as it requires strict rules on who makes decisions. In case you don’t have an operating agreement, you can draw up an informal one with other LLC members. Just make sure that you meet the LLC name requirements that vary from one state to another. Amend the name in your articles of organization After you get written approval to change your business name, you’ll need to amend your articles of organization. This is the longest step of the entire process, and you usually need to wait up to 30 days for the state to make the changes. It’s also referred to as articles of amendment or certificate of change. Each state has its own forms on how to change the name of an LLC.  You can easily download the forms on your computer and file them. The filing fees depend on your state of incorporation. Change your business name in your operating agreement The state will inform you about your approved name change by mail. Your registered agent can receive this document on your behalf and inform you when the mail arrives. You’ll then need to make updates to your operating agreement to reflect the name change. IRS LLC name change One of the most important things you need to do after you change your business name is inform the IRS about it. It’s a standard procedure requiring you to file a proper form. There are several options for paying taxes depending on whether you’re a single member, co-owner, or pay taxes as a corporation. You can read our guide on how to pay taxes with an LLC and find out everything you need to know. Inform Licensing agencies If you operate a business that requires state or federal licenses, you’ll need to inform the relevant agencies about the name change. Some of these agencies may require you to produce a certified document from the state authorizing the name change.   Change the name of an LLC on your business accounts Once the name change is finalized, you’ll need to update all your accounts, contracts, invoices, and leases. You’ll also need to contact your bank and order new credit cards and checks if your company uses them.  The business name must be updated on all your official documents. For instance, you need to change it on all the contracts with your clients and suppliers. Update the name on all other documents The formal part of the LLC name change is completed once you inform your bank and vendors, but then you need to change the name everywhere else. First off, make sure that your website is updated with the latest information. Perhaps you’ll need to change your email address if it contains the old name. You’ll also need to print new business cards, brochures, and any other promotional material you show to your clients.  How can you change the name of your LLC without changing the entity’s legal name? If changing the entity’s legal name seems too complicated or isn’t necessarily the right fit for your business, you can always choose the easier option of filing for a DBA or “doing business as.” This allows you to run your business under any name you want while keeping your legal name unchanged. A DBA is also known as a fictitious name. In some states, business owners are required to have a fictitious name so the state can protect consumers from illegal businesses. Aside from that, a DBA is commonly used for marketing purposes, allowing LLC owners to use another name for promoting their business. How much does it cost to change the LLC name? The costs of changing your business name vary from state to state. Most charge a filing fee to process your application, which typically ranges between $20 and $150. The costs can be higher for those who have LLCs that operate in several states. Bottom line It’s perfectly legal to change the name of your business, and if you follow our short guide, the entire process is straightforward and entirely manageable. But sometimes, changing the name of an LLC is not the best option for business owners. If you aren’t absolutely sure that a name change is necessary, you can file for a DBA instead. This will allow you to operate under a fictitious name while keeping your original LLC name. The DBA filing process generally involves nothing more than a small fee and a simple form.

“LLC” is a term you may often see as part of a company’s official name. But have you ever wondered what exactly it stands for? The abbreviation LLC, along with its synonyms such as L.L.C., LC, L.C., limited company, limited liability co., and Ltd. liability company, indicates that a business is formed as a limited liability company rather than a sole proprietorship, partnership, corporation, or any other type of company. If you’re on the hunt for the most suitable business structure for your newly established company or growing sole proprietorship and need answers to questions like what does LLC mean for a business and how does it work, keep reading this article.Understanding the Concept of Limited Liability CompaniesAn LLC is a type of business entity you can form by filing the necessary paperwork in the state where you intend to conduct your business. The regulations surrounding limited liability companies may vary slightly from state to state. Owners of an LLC are generally called members. An LLC can have just one owner (a single-member LLC) or many owners (a multiple-member LLC). While there are no differences in how single-member and multiple-member limited liability companies run their business, there is a difference in how these two LLC types are taxed. States impose few restrictions when it comes to LLC ownership. Members can be individuals, corporations, other LLCs, and even foreign individuals and business entities, making it an extremely flexible option regardless of your circumstances.However, depending on the nature of your business, you may not be able to start an LLC. For example, an entity such as a bank or an insurance firm generally cannot be structured as a limited liability company. Despite these restrictions, though, the LLC is America’s fastest-growing business designation type, with more than 2.4 million US businesses identifying themselves as limited liability companies nowadays.So, what is it that makes the concept of an LLC so appealing to American entrepreneurs? Not only is this business structure easy to set up, but also it provides a high level of flexibility and protection to its owners (members). In many cases, opting for an LCC represents the best of both worlds.A limited liability company, by definition, protects its owners from being held personally liable for the company’s debts. In other words, if a creditor goes after the LLC’s assets, members may lose the money they invested in the company, but their personal assets - such as real estate, vehicles, bank accounts, heirlooms, and investments - won’t be at risk. However, if the company fails to meet legal and reporting requirements or fraud is detected, the corporate veil protecting the members may be lifted, allowing the creditors to go after them. Another reason why many entrepreneurs opt for setting up an LLC is that this business type can choose not to pay federal taxes. Thanks to flow-through or pass-through taxation benefits, the profits and losses of an LLC can be passed through to members and listed on their individual tax returns. Alternatively, an LLC can choose a different classification and be taxed as a corporation. Let’s take a look at some of the most apparent differences and similarities LLCs share with corporations and partnerships, the two business structure types limited liability companies are often confused with.LLC vs. CorporationThe main difference between a limited liability company and a corporation is that corporations are owned by their shareholders, while an LLC is owned by one or more individuals or business entities. An LLC structure is governed by a written or oral operating agreement that identifies the way the company will be run, the way profits will be shared, and the roles of the members. However, limited liability companies are very flexible when it comes to the specifics of these agreements. On the contrary, corporations have a much more rigid structure of directors, officers, and shareholders.As far as maintenance goes, corporations need to organize annual shareholder meetings to maintain their status. On the other hand, LLCs aren’t required to hold annual meetings, keep minutes, or even have a board of directors.Taxation flexibility is among the main reasons why entrepreneurs choose to set up an LLC. Corporations pay corporate income tax on profits and their shareholders also pay income taxes on the profits they receive as dividends (C corps). In some cases, corporations may qualify to avoid double taxation by passing through the profits to shareholders’ personal tax returns (S corps). In contrast, limited liability companies are pass-through entities by default. However, their full range of taxation options includes the models of a sole proprietorship, partnership, S corporation, or C corporation.Creating an LLC or a corporation lets you make the most of liability protection from the company’s obligations. While both business entity types offer the limited liability feature, corporations are favored by businesses that intend to seek outside investment, while an LLC is a smart choice for startups and small, owner-managed companies that need flexibility and want to avoid excessive corporate formality. LLC vs. PartnershipWhen two or more people decide to go into business together, they don’t need to file any paperwork to officially form a business entity - the partnership is created automatically. On the contrary, forming an LLC requires filing articles of organization with the state the company plans to do business in and complying with any additional state filing rules. In addition to these formation disparities, partnerships and LLCs also differ when it comes to personal liability. While corporations and limited liability companies offer liability protection from the business’s creditors to their shareholders/members, partnerships and sole proprietorships do not. In other words, partners can lose their personal assets if their company gets sued or falls into debt. So, is an LLC similar to a partnership in any way? Yes, it is. Both limited liability companies and partnerships offer the benefits of pass-through taxation, which means that there are no corporate taxes to worry about, as business owners report the company’s profits and losses on their individual tax returns. Moreover, as far as tax benefits go, both LLCs and partnerships qualify for the 20% pass-through deduction according to the Tax Cuts and Jobs Act.Forming an LLCShould you decide to form an LLC after comparing this business structure with corporations and partnerships, note that you’ll be presented with two options; you can either form an LLC yourself or hire an LLC service company to help you with the procedure. Additionally, you can also consult with a lawyer or an online legal service company if you need help with any legal matters. No matter which approach you decide to opt for, you’ll need to take a few simple steps: Choose your state of formation. This can be the state you live, but it must be the state you intend to conduct the business in.  Pick a name for your business. Your LLC’s name must be unique in your state. We’ve already answered the question “what does LLC mean?” However, now we need to add that this abbreviation or any of its variations must form a part of your company’s formal name.  Appoint a registered agent. A registered agent or an agent for service of process is a person or company that deals with all official correspondence such as legal summons and document filings for your company. File your LLC with the state. To officially create your limited liability company, you’ll need to file your formation document (usually referred to as articles of organization) with your Secretary of State’s office. Create an LLC operating agreement. Although this step isn’t officially required by most states, we still suggest you create an operating agreement for your LLC. This document can either be written or oral, and its main purpose is to outline the member roles and ownership structure of your company. Get an EIN. After completing your formal LLC creation, you’ll need to apply for an Employer Identification Number if you want to open a business bank account and hire employees.