--- title: Starting a Real Estate Investment LLC for your Business description: Find out what you need to know about starting a real estate investment LLC for your business. Learn the pros and cons of a real estate investment LLC and much more. image: https://learn.upright.us/hubfs/house.png --- [![Upright Real Estate Investment](https://learn.upright.us/hs-fs/hubfs/Upright_RGB_PrimaryLogo-2.png?width=175&height=42&name=Upright_RGB_PrimaryLogo-2.png "Upright Real Estate Investment")](https://upright.us/) [![Return Home >](https://no-cache.hubspot.com/cta/default/2129804/90add894-e0b2-4f0c-bc22-7c5b348dd1d7.png)](https://cta-redirect.hubspot.com/cta/redirect/2129804/90add894-e0b2-4f0c-bc22-7c5b348dd1d7) [Back to the Blog](https://learn.upright.us/real-estate-investing-blog) # Starting a Real Estate Investment LLC for your Business July 26, 2016 | By [Matt Rodak, CEO and Founder](https://learn.upright.us/real-estate-investing-blog/author/matt-rodak) ![Man looking for a house and setting up an LLC for real estate business](https://learn.upright.us/hs-fs/hubfs/house.png?width=640&name=house.png "Hard money lender, private loan, real estate investing, rehab load, LLC, investing") If you’re in the residential real estate investment business, and have worked with a [hard money lender](https://www.upright.us/loans/hard-money-lender) or used other private investor money, the lender is likely to require you to set up an LLC. You may wonder why this is the case? First let’s take a look at what an LLC is and why it’s important to have one.  According to the [United States Small Business Administration](https://www.sba.gov/content/limited-liability-company-llc) (SBA), an LLC is a “hybrid type of legal structure that provides the limited-liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.” Let’s take a quick look at a few advantages and disadvantages of forming an LLC for your fix-and-flip business. Advantages **Limited Liability: ** It protects owners from personal liability in the case of judgements or debts against the business. Only your LLC would take the hit and your personal assets will be protected. In this situation, the members’ personal assets are protected, similar to the protection offered to the shareholders of a corporation. (Caveat here is that some hard money lenders will require that you provide a personal guarantee which gives them some recourse to your personal assets.) **Tax Options:** An LLC is taxed as a sole proprietorship, partnership, S corporation, or Corporation based on who or what owns the LLC.  For example, if the LLC is held by a person then income and losses flow into the owner’s personal taxes; if the LLC is held by an C-Corp, net earnings will flow into the C-Corp’s taxes and so forth.  Pro Tip: Set-up one master LLC that holds individual LLC's for each property. The earnings of each property flow into the one master LLC. **Perpetual Existence:** Depending on your State’s laws, an LLC has a life of its own regardless of its owner and can continue to exist after the owners sell their shares or pass away.  If you’re looking to pass along your portfolio to your family, this is a benefit to take into account.   Disadvantages **Cost and Administration:** There is a cost to set up new LLC's. These are typically nominal, but it is an additional expense. Further, you'll need to set up bank accounts and accounting systems for the entity.  **Additional Taxes:** Some states, for example, Texas, New York, and California obligate LLC’s to pay a *capital values tax*. Essentially, the Capital Values tax on LLC’s is the fee paid to the state for the administration of the limited liability.  It can be based on revenue, profits, number of owners, and amount of capital employed in the state. The Takeaway LLC’s help protect your personal assets from liabilities incurred by your business. There are some tax advantages but there are also some additional costs.  If you're serious about being a professional real estate investor, setting up an LLC is highly recommended, and usually required to get a [hard money loan](https://www.upright.us/loans/hard-money-loans). While there are additional costs, the benefits of protecting your assets likely outweigh the downside of additional nominal costs.    [![Get Funded ](https://no-cache.hubspot.com/cta/default/2129804/f0a761db-b262-485e-b182-33df7c4c7db3.png)](https://cta-redirect.hubspot.com/cta/redirect/2129804/f0a761db-b262-485e-b182-33df7c4c7db3) - - - ### Returns up to 13% investing in real estate. Diversify your portfolio with short- or long-term investments, individual or pooled fund offerings, and hundreds of developers and project types throughout the U.S. [![Sign Up](https://no-cache.hubspot.com/cta/default/2129804/9beb5019-97e3-48ab-bc90-ee874cd213ac.png)](https://cta-redirect.hubspot.com/cta/redirect/2129804/9beb5019-97e3-48ab-bc90-ee874cd213ac) ### Loan commitments in about 24 hours, with pre-approval up to $5M to make winning bids. 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Investors should not rely on forward-looking statements because such statements are inherently uncertain and involve risks. No returns are guaranteed and these types of investments involve a high degree of risk.   Neither the Securities and Exchange Commission (SEC) nor any federal or state securities commission, or any other regulatory authority has recommended or approved of the investment or the accuracy or inaccuracy of any of the information or materials provided by or through the website. Direct and indirect purchase of real estate property involves significant risks, including, but not limited to risk related to sale of land, market and industry risks, and risks specific to a given property. Investments are not bank deposits, are not insured by the FDIC or by any other Federal Government Agency, are not guaranteed by Fund That Flip, Inc. dba Upright, and may lose value.   Fund That Flip, Inc. dba Upright does not make investment recommendations and this message should not be construed as such. This message is not an offer to sell or the solicitation of an offer to buy any security, which can only be made through official offering documents that contain important information about risks, fees, and expenses. Any investment information contained herein has been secured from sources Fund That Flip, Inc. dba Upright believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefor. We recommend that you consult with a financial advisor, attorney, accountant, and any other professional who can help you to understand and assess the risks associated with any investment opportunity. If and when Fund That Flip, Inc. dba Upright is able to make investment opportunities available, only accredited investors who submit required verification will be able to invest.     **© Fund That Flip, Inc. dba Upright, 2024  | [Privacy Policy](https://www.upright.us/legal?tab=privacy-policy) | [General](https://www.upright.us/legal?tab=terms)[Terms of Service](https://www.upright.us/legal?tab=terms) [|](https://www.fundthatflip.com/terms-of-service) [Investment Terms of Service](https://www.upright.us/legal?tab=investment-tos)**     ![](https://www.facebook.com/tr?id=1484345195216823&ev=PageView&noscript=1) ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Matt Rodak, CEO and Founder", "url" : "https://learn.upright.us/real-estate-investing-blog/author/matt-rodak" }, "dateModified" : "2023-11-07T16:22:28.316Z", "datePublished" : "2016-07-26T03:54:04.000Z", "headline" : "Starting a Real Estate Investment LLC for your Business", "image" : [ "https://learn.upright.us/hubfs/house.png" ], "mainEntityOfPage" : { "@id" : "https://learn.upright.us/real-estate-investing-blog/llc-for-your-real-estate-investment-business", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://learn.upright.us/hubfs/Upright_RGB_PrimaryLogo-1.png" }, "name" : "Upright" } } ```