There is a lot of misinformation in the real estate investor community about the entities that you should use. Many companies promote the alleged value of Nevada or Wyoming LLCs because of asset protection or anonomity. What they don’t tell you is that Kansas has the same charging lien protections as Wyoming and there is no such thing as true annonomity when it comes to entity formation. If someone really wants to sue you, they will figure out who the owners are — trust me because as a lawyer I do it.
More important than this, however, is that anyone who tries to sell you on a one-sized fits all entity structure is not looking out for your interests. For example, I am aware of an attorney down in Texas who promotes a structure with series LLCs and Land Trusts. I am not saying this isn’t a good structure — and in fact at times I would recommend it — with that being said, that elaborate of an entity structure may not be necessary for a retired couple living on social security and income from their rentals or an eighteen year old with no assets who is working on purchasing his first property.
The bottom line is that your entity structure needs to be right for you, and that is why we developed a detailed process that helps to evaluate your risk tolerance, organizational skills, investment strategy and future plans, and assets you risk losing. Once we have reviewed that information, we will present a plan to you that we think is best, but that plan will include options and ultimately you will decide what plan is best for you after learning the pros and cons of each option. Moreover, if your business model includes partners or other investors who you work with on projects, we will have detailed conversations about how to structure the business to ensure accountability of all involved and to address situations such as how to proceed on an issue when there is a tie, or when one of the members dies.
Business Planning Process
Our business planning process can take 1-2 weeks and is not intended for someone that is simply looking to form a quick LLC. If that is something you are looking for, I would recommend going to the Kansas or Missouri Secretary of State’s website as it can be done with a short webform and will be formed in a few minutes. On the other hand, if you are looking for detailed planning to protect you, your assets, and your business partners, our services are might be what you are looking for.
Step 1: Sign up for Guarded Pockets™
If you are not yet a member of Guarded Pockets™, the first step is to become a member. In addition to allowing us to help with your business planning, Guarded Pockets™ also provides many other benefits, including unlimited scheduled phone calls with a real estate attorney, registered agent and deed of trust trustee services, state compliance monitoring, daily REO and distressed MLS listing emails, and discounted title and real estate brokerage services. You can learn more about Guarded Pockets™ or sign up for a free trial by clicking on this link.
Step 2: Sign up for Services
Once you are a member of Guarded Pockets™, you can sign up for our services including our business planning services. Initially, you will sign up for a business planning consultation where we will review your business plan, assets, risk tolerance and other factors to develop the perfect entity structure for you. After this consultation, you can elect to utilize us for additional services forming your entity or may form your own entities based on our recommendations.
Step 3: Complete Intake Form
If all we do is form an entity for you, we are not providing you any more value than if you went to Legal Zoom or filed it yourself. The value in hiring an attorney to help form your entity is so that you can have a discussion about the right entity structure based on your business goals, risk tolerance, attention to detail, income, assets, and many other factors. Moreover, because all of these factors affect your entity choice, it is not a one size fits all answer for investors.
In order to help us gather the information to help you make an educated decision on your entity structure, we have created a form you can use to answer questions that help us to get to know you and your business better.
Step 4: Strategy Session
Once we have received your information through the online form, the next step is to schedule a time for a strategy session where we will go over the information you submitted and discuss our recommendations on the right entity structure for your unique situation.
Step 5: Entity Information
Now that we have determined the appropriate entity (or entities) to form for your situation, the next step is to gather the information necessary to form the entity. This information includes general items, such as the name of the entity, the address, and the person who can accept service on behalf of the entity. If your entity will be owned by more than one person, this will also be the opportunity for you to think about what items require the approval of all owners, who will run the day-to-day operations, and other aspects about how to handle the business. It is also during this step that you will provide your payment information for the entity or entities we are forming on your behalf. This step (and the following steps) are optional as you can elect to form your own entities following the consultation.
Step 6: Document Preparation
During this phase, we will complete the information necessary to form your new entity. The documents to be prepared include (depending on the specific entity type):
– The Articles of Organization or Incorporation – The Bylaws or Operating Agreement – Foreign Registration (if necessary) – Obtaining your Federal EIN
This stage can take a few days or even a week as we want to make sure that all of your documents are correct and reflect the terms we discussed during your strategy session.
Step 7: Client Review/Finalization
During this stage, we will provide you with a copy of the formation documents and a draft operating agreement or bylaws. As you look through these documents, if there is anything that you would like changed, please contact us. If everything looks good, the document can be signed and stored in your company records. If you would like, send us a copy and we will also keep it in our records for your later reference.
Once you have signed the documentation, your entity is fully formed and this matter will be closed in our office; however, you will remain a client of the form for as long as you maintain your Guarded Pockets™ membership.
At Rick Davis Real Estate Law, we believe in having fair, predictable and transparent pricing. Therefore, we post all of our pricing here on our website. With that being said, the cost of business planning will vary depending on the structure selected for your business.
If you sign up for our services, we will schedule a strategy session where we discuss the right entity structure for you and your business. The cost of the strategy session is $250; however, that amount is then applied to the fees owed for forming your entity. The reason we charge for this initial strategy session is that we will spend time evaluating your situation and the information you submit on your intake form, and following the strategy session you are not required to use any additional services from our firm.
The costs for the formation of your entity will then vary based on the entity structure selected. You can view our pricing by visiting this page on our website, which links to the exact same forms you will use to sign up for services after becoming a Guarded Pockets™ member. All costs include the required state fees and are all inclusive.
On-Going Legal Advise
Forming your entity (or entities) is only step one of setting your real estate investment business up for success. Real estate investors deal with a never ending series of legal issues — whether it be a dispute with a tenant, a unique deal that needs to be properly documented, a homebuyer who claims that a rehabber failed to fix a gas line leak, or a wholeseller who needs to know how to properly structure his or her assignment documents so the title company will close your transaction. Moreover, many times an expensive legal dispute could have been avoided by obtaining advise from a lawyer earlier in the process. The problem, however, is that many real estate investor can’t afford (or aren’t willing) to invest in having an attorney “on-retainer” to ask those never ended legal questions. In order to solve this issue, we have created our Guarded Pockets™ program. Members of Guarded Pockets™ have unlimited access to scheduled calls with a real estate attorney to ask those quick legal questions the arise while investing in real estate, and access to a library of contract forms that can be used for your business. Additionally, as unlimited resident agent services (Kansas and Missouri) is included with our Guarded Pockets™ program, it is a create compliment to our business planning services. Moreover, the week of Guarded Pockets™ is free for all new members so you have nothing to lose from giving it a try. Please click here to learn more about Guarded Pockets™ or to sign up to have a lawyer-on-call for your real estate investment business.