what type of lawyer do i need to setup an llc holding company and estate plan

by Lucy Upton 3 min read

No, you don't need a lawyer to set up your LLC- you can probably do it on your iPhone. Yes, you need a lawyer to assist you in making sure you are doing all the things you need to do with your LLCto make sure it is really providing asset protection Rotate

Full Answer

Do I need an attorney to start an LLC?

Partnerships and LLCs must register with the state. Documents must be prepared, such as a partnership agreement or an LLC operating agreement. You might be able to register online with your state or use an online service to register your business, but it might be a good idea to use an attorney if your business is at all complicated.

How do I start an LLC holding company?

Starting an LLC holding company includes many of the same steps as starting a typical LLC business. The main difference is making sure that the bulk of your business’s assets wind up under the control of the holding company. The following steps outline the general process. Choose a registered agent and file articles of organization with your state.

Can an LLC be used for estate planning?

Using an LLC for Estate Planning. Somewhere between a corporation and a partnership lies the limited liability company (LLC). This hybrid legal entity is beneficial not just for small-business owners, but is also a powerful tool for estate planning.

Can I own a property with a business holding company LLC?

The property will be owned under Business Holding Company, LLC, with a property manager in charge of operations. Let’s say I purchased an apartment complex before starting Business Holding Company, LLC. In this case study, I now want to move that property into my newly formed LLC.

How do I set up a holding company for an LLC?

How Do I Start a Holding Company?Choose a registered agent and file articles of organization with your state. ... Open a new bank account for the holding company.Fund the holding company and transfer any existing assets from the operating company to the holding company.

Can an LLC be used as a holding company?

An LLC can be set up as a holding company, but when it is it will have no operation or function other than owning the other company and their assets. The company where the operations and business occurs, including where the employees and liabilities are, is referred to as the operating company.

What type of business does not require an attorney to set up?

A sole proprietorship is the simplest business form. It doesn't require that you register your business with your state, so no, you probably don't need an attorney to start this type of business.

Is a holding company the same as an LLC?

A holding company is a business entity—usually a corporation or limited liability company (LLC). Typically, a holding company doesn't manufacture anything, sell any products or services, or conduct any other business operations. Rather, holding companies hold the controlling stock in other companies.

Can a holding company own real estate?

A holding company can own shares of a private corporation with active business operations. It can also hold passive assets, such as publically traded securities, bonds, real estate and so on.

Do I need an EIN for a holding company?

All corporations must have a federal tax ID number to do business, and there are only rare situations (a holding company that does not pay tax of any kind) where an LLC wouldn't need an EIN. Your tax ID number will be required to fill out payroll reports, pay taxes, open a business checking account, etc.

What's the difference between attorney and lawyer?

Attorney vs Lawyer: Comparing Definitions Lawyers are people who have gone to law school and often may have taken and passed the bar exam. Attorney has French origins, and stems from a word meaning to act on the behalf of others. The term attorney is an abbreviated form of the formal title 'attorney at law'.

Do I need a registered agent for my LLC?

No matter where you're starting your business, if you're forming an LLC or corporation, you're required to have a registered agent and a registered office.

Why should the small business owners have a lawyer in their team?

To minimize your risk as an employer When you hire a small business lawyer, you can mitigate that risk. Your lawyer will be able to advise you in various situations and will draw up the contracts you need for your employees, as well as your clients and partners.

Does a holding company file a tax return?

The IRS only requires one form because the holding corporation files a single tax return for the entire group. This consolidated tax return includes all earnings, losses and profits for each subsidiary company, as well as for the holding company filing the return.

How is a holding company LLC taxed?

If your holding company's subsidiary is also an LLC, it will be taxed as a pass-through entity. This means that all of your operating company's profits will pass to the holding company that owns it. These profits will then be passed to you as the owner and reported as personal income on your tax return.

What are the tax advantages of a holding company?

The main tax advantage of a holding company is that it does not have to file different tax returns for each subsidiary company. Generally, subsidiaries can pay dividends to the holding company without creating a tax liability.

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How many LLCs does an investor have?

The investor forms four LLCs—one to serve as the parent LLC and three to serve as subsidiary LLCs—and places the real estate into subsidiary LLCs. If a lawsuit arises against a subsidiary LLC, the plaintiffs can only look to the assets of the LLC. For example, if Property 1, LLC, is successfully sued, the creditor can only look to ...

Why is it important to have a single LLC?

Forming a single LLC protects the owners ( members) from personal liability for debts and obligations of the LLC. As long as the LLC is properly formed (including a solid operating agreement) and managed, creditors of the LLC can only look to the LLC’s assets to satisfy claims against the LLC.

What is a series LLC?

Series LLCs are a relatively new form of LLC designed to provide similar protection to the holding company structure, but without requiring the formation of multiple LLCs. Instead of forming a parent LLC and multiple subsidiary LLCs, real estate investors can form a single series LLC and establish multiple series of assets within the LLC.

Can a creditor look at two residential properties?

The creditor cannot look to the two residential properties that are owned by separate LLCs. The holding company structure has been around a while and is fairly common in real estate transactions.

What is LLC holding company?

An LLC holding company is a way a business is structured that is popular with small businesses and start-up ventures. This structure blends the benefits of a partnership and a corporation and provides tax benefits, as well as protection of personal assets from liability.

What are the advantages of LLC?

Even though there are drawbacks, there are some benefits to having an LLC as a holding company. Even though creating the division between the ownership company and the operating company can be a little complex, there are advantages to having these two entities separate. Some of the benefits of an LLC as a holding company are: 1 The operating company can shield its sole member from limited liability. 2 The holding company can be protected from torts that occur as a result of the employees of the operating company. 3 The holding company members will also enjoy the protection of limited liability. 4 Since the holding company is the true owner of all of the operating company's assets and most of its cash, the company has additional protection from debts and creditors. 5 Since the holding company provides no operations there is almost no opportunity for liability.

Can an LLC be an S corporation?

Some LLCs may wish to eventually incorporate and choose Subchapter S corporation designation for tax purposes. It is important to note that changing from an LLC to an S corporation will bring about restrictions on ownership, including who can own a company and how many shares can be sold.

Can an operating company protect its sole member from liability?

The operating company can shield its sole member from limited liability. The holding company can be protected from torts that occur as a result of the employees of the operating company. The holding company members will also enjoy the protection of limited liability.

How does a family LLC work?

How a Family LLC Works. After you have established your family LLC according to your state’s legal process, you can begin transferring assets. You then decide on how to translate the market value of those assets into LLC units of value, similar to stock in a corporation.

What is LLC protection?

Like a corporation, LLC owners (called members) are protected from personal liability in case of debt, lawsuit, or other claims, thus protecting personal property such as a home, automobile, personal bank account, or investment.

Why do you need an LLC for your children?

Establishing a family LLC with your children allows you to: Effectively reduce the estate taxes your children would be required to pay on their inheritance.

What is LLC in business?

A limited liability company (LLC) can be a useful legal structure through which to pass assets down to your loved ones while avoiding or minimizing estate and gift taxes. A family LLC allows your heirs to become shareholders who can then benefit from the assets held by the LLC, while you retain management control.

What is family owned LLC?

A family-owned LLC is a powerful tool for managing your assets and passing them along to your children. You can maintain control over your estate by assigning yourself as the manager of the LLC while providing significant tax benefits to both yourself and your children.

Do LLCs report profits?

As a partnership, members of an LLC report the business's profits and losses on their personal tax returns, instead of the LLC itself being taxed as a business entity. 1 .

Can you transfer ownership of an LLC to your children?

Now you can transfer ownership of your LLC units to your children or grandchildren, as you wish. The discount on the value of units transferred to non-managing members of an LLC is based on the fact that without management rights, LLC units become less marketable.

Why do business owners choose LLCs?

In fact, due to their recognizable nature, most business owners choose an LLC structure because they are unfamiliar with the many legal nuances associated with other options. Others assume LLCs are the best way to go. In reality, no one entity encompasses or covers the needs of every business. While most real estate investors favor LLCs, there are other options available. Corporations and partnerships, while different in their own right, share many similarities. The following is a breakdown of other legal entities:

What is a real estate holding company?

A real estate holding company is a legal entity designed to protect business owners from the risks that come with owning investment properties. Real estate holding companies, also known as limited liability companies (or LLCs), do not participate in business operations themselves but own different assets.

What is a holding company?

Generally speaking, the holding company’s structure will look something like this: the holding company or LLC is at the top, and individual subsidiaries exist underneath it. For real estate, the subsidiaries will typically be investment properties. The holding company itself will not have a hand in day to day operations of each property but will instead serve as a parent company. There are several benefits to utilizing this structure, which we will discuss below.

Why are holding companies important?

Holding companies provide investors with more flexibility to distribute their profits. Real estate investment company enables investors to purchase properties in the U.S. and abroad. A holding company is more easily transferrable than other entity types.

Why do companies own investment properties?

Through a holding company, owning investment properties is also known to create significant tax benefits, and ease of administration when compared to other legal entities.

Do you have to pass through tax on a real estate holding company?

As the owner of a real estate holding company, single-member or multimember, you are entitled to pass-through taxation benefits. Again, all of these tax benefits are in addition to the liability protection shield that was previously discussed.

Is real estate a lucrative career?

Investing in real estate is a rather lucrative career choice. There is traditionally a lot of money involved in every deal—at least more than the average individual can cover on their own accord. Having said that, it is absolutely imperative for respective investors to protect their personal finances (those outside of their business finances ). First and foremost, LLCs limit personal vulnerability to potential lawsuits related to the property, which is perhaps the most intriguing aspect of starting a holding company.

What is the intangible benefit of owning and holding real estate in the name of an LLC?

An intangible benefit of owning and holding real estate in the name of an LLC is that it appears to the public to be more "businesslike," especially when advertising a property for lease to commercial or residential tenants.

Why do you put a title in an LLC?

Another reason to place a property title in the name of an LLC is that it gives you liability protection against monetary judgments if a financial dispute involving the LLC arises.

What is LLC in real estate?

LLCs have become one of the most popular business entity types for acquiring real estate. Owners often prefer to form an LLC when purchasing real estate—or when transferring title to real estate from an individual to the LLC—so that the LLC becomes the legal owner of record and not the individuals. To help you choose what's best for you, consider ...

Can an LLC be sold?

An LLC can be sold through a relatively simple transfer of membership interests. The LLC's real estate will continue to be owned by the LLC but with new LLC members crewing the ship. Therefore, continuity is preserved, and the transfer is seamless.

Is real estate profitable?

Investing in real estate can be profitable. It also comes with potential risks. Whatever your reason for snatching up real estate, many individuals—particularly investors—choose to form a limited liability company (LLC). LLCs have become one of the most popular business entity types for acquiring real estate. ...

Is LLC income taxed at corporate level?

Any income earned by the LLC is not taxed at the corporate level ...

Is LLC income taxed?

Any income earned by the LLC is not taxed at the corporate level (as would be the case with a traditional corporation) but only at the individual level. Each LLC member reports the income on their individual federal income tax returns—usually on Schedule C.

How to start a holding company?

How Do I Start a Holding Company? 1 Choose a registered agent and file articles of organization with your state. You may also want to consider looking into the tax advantages of registering your LLC in a different state than your own. 2 Open a new bank account for the holding company. 3 Fund the holding company and transfer any existing assets from the operating company to the holding company. All holding company and operating company assets must be kept separate to ensure your limited liability protection remains intact.

What does it mean to set up a holding company?

Setting up a holding company means creating an additional company from the ground up. Among other things, this means one more company worth of paperwork to do and bank accounts to open. This takes time and increases expenses.

Why are holding companies called umbrella companies?

Holding companies are often called “umbrella” companies because they protect the subsidiary companies underneath them. For example, a bicycle helmet business may consist of a holding company that owns the factory, machinery, and any patents for the helmets (as well as shares of the operating company), while the operating company pays to use the factory to produce the helmets and hire employees to sell them. Since the operating company doesn’t actually own any of the business’s assets, if it were to be sued by a customer who sustained a head injury in a bike crash, the holding company’s assets would be protected in the event of a court-ordered payment or a settlement.

What is subsidiary owned by holding company?

A subsidiary owned by a holding company is known as an operating company. This company is responsible for the day-to-day operations of the business. An operating company will hire employees, sell products, and provide services to customers. Often, operating companies will lease equipment or facilities from the holding company to perform their ...

Why do businesses need holding companies?

This is because multiple businesses increase the potential for liability and losses. A holding company offers a way to organize your businesses under one umbrella while also providing a layer of financial and legal liability protection to each individual business and to you as the owner.

What happens if a company is sued for a bike crash?

Since the operating company doesn’t actually own any of the business’s assets, if it were to be sued by a customer who sustained a head injury in a bike crash, the holding company’s assets would be protected in the event of a court-ordered payment or a settlement.

Why is holding company important?

A holding company allows a business to organize and brand its different business lines. This can be helpful with creating better name recognition, targeting marketing efforts, and strengthening relationships with customers.

Can I register my business online?

You might be able to register online with your state or use an online service to register your business, but it might be a good idea to use an attorney if your business is at all complicated. Corporations or S corporations must register with the state as well.

Do I need an attorney to start a business?

The simpler your business, the less you'll need an attorney. A sole proprietorship is the simplest business form. It doesn' t require that you register your business with your state, so no, you probably don't need an attorney ...

How long does it take to set up an LLC?

With a service company, setting your LLC up will take you about an hour and they will do the rest, such as filing paperwork with the state.

What is an LLC?

An LLC should have an operating agreement that lays out procedures, outlining what may or may not be done. This is beneficial for multiple people who want to set up an investment plan. They can invest in stocks, bonds, mutual funds, real estate, and other opportunities.

What is an LLC in 2020?

Updated July 13, 2020: An investment LLC allows a group of people to invest together. It is not necessarily an investment in a business; it can be used for other things like real estate. An LLC is a flexible entity with some of the same characteristics of a corporation, and also of a partnership.

What information is needed for LLC formation?

Formation documents in any state will ask for the same information, such as the LLC's name, its address, and the contact information for a registered agent who is willing to serve the LLC.

What is LLC in real estate?

By using an LLC, you will be protected from liabilities associated with real estate ownership, and if there are multiple owners, it will lay out how the ownership of the property will be divided among them. This is particularly useful if multiple properties will be purchased.

Is it hard to set up an LLC?

Setting up an LLC for the purpose of investment isn't difficult. However, most people prefer to hire a professional company that does all the hard work of LLC formation instead of doing it themselves. Choosing a service company for your LLC formation is just like shopping for anything else; it pays to compare prices, support levels, and reviews. ...

Do LLCs pay taxes?

How Investment LLCs Pay Taxes. LLCs pass profits and losses on to their members. For this reason, they should not be used by someone looking for a way to reduce income taxes. However, LLCs can also elect to be taxed as corporations, which will impact the way taxes are calculated among each owner.