Why an LLC?
An LLC separates your personal assets from your business activities, opens the door to S-Corp tax treatment once your GCI grows, and signals to vendors and clients that you operate as a real business — not a hobby.
Step-by-Step Formation
- Choose a business name that includes 'LLC' and is available in your state's Secretary of State database.
- File Articles of Organization with your Secretary of State (typically $50–$300).
- Apply for an EIN through the IRS website — free, takes about 10 minutes.
- Draft an Operating Agreement, even as a single-member LLC. Banks and brokers will ask for it.
- Open a dedicated business checking account. Never commingle personal and business funds.
- Register with your state's Department of Revenue if your state collects income tax.
Broker Compensation Setup
Most states require your broker to pay your LLC instead of you personally — and it requires a signed compensation agreement on file. Confirm with your broker, then provide your LLC name, EIN, and a W-9.
S-Corp Election (When You're Ready)
Once you're netting roughly $50K+ from real estate, talk to a CPA about filing IRS Form 2553 to elect S-Corp tax treatment. This can save thousands per year in self-employment tax.
Action Items
- File Articles of Organization this week.
- Get your EIN the same day you file.
- Open a business checking account and order debit cards.
- Sign your broker's compensation-to-LLC agreement.
- Schedule a consult with a real-estate-savvy CPA before year end.