After you create a legal entity by either incorporating (C or S corporations) or forming an LLC, it’s important to know what to do next. Some states have extra requirements after you’ve completed all of the paperwork for your legal entity to become activated, and depending on the type of legal entity you chose you’ll want to make sure you’ve setup your bylaws or operating agreement. 

Regardless of where your business is located, it’s important to know how to start operating with your new entity at the front of your processes. Registering your business with a trusted partner can take away the worry that often comes with the laws and requirements being different in every state. However, below we’ll briefly cover the things to think about when you’re registering your business by yourself. 

What Every Business Should Do After Legal Formation

After you’ve completed all of the paperwork and filed it with your state, both corporations and LLC have a few similar steps that everyone needs to think about. Next, we list out the ones that every single business should keep in mind as you start operating under your new legal entity. 

Open a Business Bank Account

One of the best protections a legal entity can provide you personally, as the business owner, is the separation of business assets and personal assets. This financially helps keep you and your personal property safe from any poor business performance. In order to fully protect your personal assets, you’ll need to make sure that your finances aren’t mixed with your business finances at all. 

Creating a business bank account allows you to easily pay your bills and know how much cash your business has on hand at any given time. It’s a good idea to immediately open a business bank account as soon as you have all of the legally required paperwork. This includes both the registration of your business with your state and typically your federal employer ID number. 

Obtain Your Federal Employer Identification Number (FEIN)

Your federal employer identification number, or your federal tax identification number, is a unique nine digit number given to you by the IRS. This gives the government an opportunity to know who you are when you pay taxes and pay your employees. This is a requirement to obtain if you have and pay any employees at all, including yourself (unless you pay yourself only through profit distributions). 

You can apply online through the IRS website, via fax, or by mail. If you’re an international business owner you can apply via telephone during specific times. The responsible party for each business looking to obtain a FEIN must be an individual and not another legal business entity. 

Setup Business Payroll

If you have employees, you should setup your business payroll quickly upon receiving your federal employer identification number. You don’t want to get behind paying employees and you also don’t want to personally pay anyone out of your own account once you’ve incorporated or filed the paperwork for your LLC. You don’t want to give any reason to believe your personal and business assets should be mixed together. 

Setting up business payroll can be done a number of different ways but we recommend finding a software that you like and using it to help you through the process. Various software products will do all the payroll calculations and tax filings on your behalf so that you don’t have to add another headache to your business operations. 

Notify All Business Partners of Your Legal Entity Change

If you’ve been operating under a partnership then you’ll need to make sure every single partner receives written notification of the change of your business’s legal status. This should include copies of all the paperwork, showing exactly what it means for each partner and how much of the new business everyone owns. 

Start Operating Your Business

Now that you’ve legally formed your business, it’s time to start operating with your legal name or DBA (a name you’ve registered with your state for “doing business as”)! All of your practices moving forward should take into account the fact that you’ve now registered your business. 

This will mean something different for every business but outside of the clear financial changes (such as operating from a business bank account), your business may need to change the name you’re using on all communications. Your state may have unique rules that you’ll need to be aware of before operating your business so that you stay compliant, so it’s likely best to check with an attorney or a partner who specializes in business formations.

What to Do After Incorporating

If you’ve formed an S or C corporation, then your requirements after you incorporate differ slightly from other business types. The things that these types of businesses will need to do after they file include: 

• Review Incorporation Documents: Make sure everything you’ve filed was inputted and filed correctly. You don’t want to rely on information that wasn’t included in your incorporation documents. 
• Make Sure You’ve Completed All Steps: Some states might require additional steps to make your incorporation complete. Make sure you fully understand what those requirements are, or if your state even has any. 
• Create a Corporate Minute Book: Keeping meticulous records will be very important for your business moving forward. This starts with keeping minutes of each board meeting, which can be kept inside of your new corporate minute book. 
• Hold an Organizational Meeting: You need to hold your first organization meeting to formally announce the business structure and to adopt bylaws, which is an important step to finalize your incorporation.
• Adopt Bylaws: Adopting bylaws by which the business will operate is a legal requirement for all corporations. These will become important as the business operates moving forward and none of these should be taken lightly. 
• Issue Shares of Stock: Ownership in corporations is given via the issuance of shares of stock. When you incorporate you need to decide how many shares the business has (you can create more in the future) and who owns how many shares, based on the percentage of ownership each person or entity has in the business. 

What to Do After Forming Your LLC

Forming an LLC is a bit different than incorporating. If you’ve created an LLC, then it’s important to do these things after you’ve finalized the paperwork with your secretary of state’s office: 

• Review LLC Documents: This is similar to incorporating, but you need to make sure that all of your paperwork was completed correctly and that you understand what it all means. 
• Make Sure You’ve Completed All Requirements: When you form an LLC your state may have requirements to finalize your formation and make it legally valid. For example, some states require you to make a public post in a local newspaper that your business has been formed. Make sure you fully read your state’s requirements after you form your LLC to make sure you’ve abided by all requirements. 
• Create an LLC Minute Book: Formally documenting everything that happens in your business, or at least your big decisions, will be important moving forward. This is especially important if your business has multiple owners. The difference from a corporation is that LLC’s are not legally required to hold annual meetings and keep minutes. It’s still a good idea to organize the decisions of the business though. 
• Hold an Organizational Meeting: Every new business should have an initial meeting to layout the organizational structure of the business. For an LLC, this is a good time to adopt an operating agreement. 
• Adopt an Operating Agreement: Most LLCs will be required to draft and execute an operating agreement which the business will live by. Check out our article to understand the differences between an operating agreement and corporate bylaws. 

This is a pretty inclusive list of all the things you should be thinking about to either finalize the formation of your business or to start operating after your legal paperwork is complete. Using a service, like ours, takes a lot of this out of your mind because we provide the information and packages necessary to get all of the requirements out of the way. Register your business with us today and we’ll provide the peace of mind that your work is being fully completed!

Frequently Asked Questions After Incorporating or Forming an LLC

You may have more specific questions about whether or not you should do something after incorporating or forming your LLC. We’ve put together a nice list that’s inclusive of pretty much anything that you might be thinking about, which is relative to this type of activity. Check out our frequently asked questions if you don’t see the answer you’re looking for in this article.

An operating agreement is used by limited liability companies (LLC) to establish the operations of the business. An operating agreement for an LLC is very similar to by-laws that are used by legal corporations. Within the operating agreement is typically the terms agreed to by members of the LLC, including both day-to-day operating procedures as well as special circumstances. 

If you’re ready to complete and file your LLC paperwork then you should also make sure you’re drafting an operating agreement to outline the rules for members of the LLC. This can protect your liability and make sure all members are on the same page with operating procedures and bound to them legally. My Company Works offers same-day LLC filing and we’ll provide you with an operating agreement for your state as a one-stop-shop. 

What is an Operating Agreement Used For? 

An operating agreement is a legally binding document used by members of an LLC to outline contingencies with their legal relationship within the business. Without an operating agreement then the owners of an LLC would be leaving to chance how a court wants to handle any potential future dispute amongst themselves. 

If you have an LLC then it’s important to draft an operating agreement at the time of business formation. It’s not a legal requirement, in most states, for an LLC to have an operating agreement but it is recommended by many legal experts so that your business operations are protected for your needs. 

Every operating agreement is typically different because each business has different owners with unique circumstances and relationships. It’s important for some to have procedures in place for taking on money in the future while it’s important for others to establish what happens if one of the members of the LLC gets a divorce. 

How to Prepare an Operating Agreement

An operating agreement is a business contract so it’s drafted similarly to any other one. While your articles of incorporation are required to be filed with your state, an operating agreement is not. The operating agreement is optional in many states and rules for these agreements could vary based on the state you incorporate in. You’ll want to partner with a company that is experienced in drafting these within your state, or a local attorney, to make sure you’re creating an operating agreement that benefits your needs. 

The operating agreement should contain information about your company and its members. The agreement should include all the information that you find needs to be spelled out in how the various LLC members and manager(s) work and interact together. There might also be some specific laws in your state that you’d like to moderate for your business by including different rules in your operating agreement. Some of the most common terms included in operating agreements are discussed below. 

Terms to Include in Your Operating Agreement

Your operating agreement, and the terms it contains, should be unique to you and your business. You should also include terms that will allow your business to operate differently than any state rules that don’t work for your business. For example, some states require all profits to be distributed equally, unless otherwise stated in your operating agreement. 

With those considerations, here’s a list of some of the most common terms you’ll want to think about including inside your LLC’s operating agreement: 

• Equity Structure & Membership Interest: Who owns the business and, typically, what percentage of the business does each LLC member own? The membership interest can be broken up into two different components: the economic interest and management interest. Technically someone who owns more management interest in the business could have full control of decision-making even if someone else owns more of an equity interest, though this typically isn’t the case.
  
• Rules for Allocation of Profits: There are basic rules for the allocation of profits, which is typically the rule that all profits are distributed evenly based on the percentage of ownership. However, you could alter this rule by coming up with your own within the operating agreement.
  
• Management Structure: With an LLC you can set it up where it’s managed by members of the LLC (owners) or by a manager. If you’re setting it up to be run by a manager then you would need to define how that relationship will work within this section of the operating agreement so that everyone is on the same page.
  
• Transferability: This section of the operating agreement will define the rights and restrictions of LLC members to transfer their rights and ownership. You may enact veto rights by the other members in case a single member is trying to sell a large interest to an outside party that the rest of the members don’t want to operate with. You could also enact a right of first refusal in the event of a potential sale to allow the other members to potentially purchase the ownership interest instead of a sale to a third party.
  
• Buyout: This clause in the agreement would outline the rules behind certain buyout situations. For example, if a member of the LLC dies, divorces, or files for bankruptcy. The rules could stipulate that the company buys back the membership interest in any of those circumstances so that the other members don’t have to deal with an unexpected party.
  
• Dissolution: This stipulates the circumstances of how the LLC can be dissolved, typically by unanimous or a majority vote of the members.
  
• Records: This provision will dictate how and what records should be kept for the company, and often how long the records should be held. The most important part is to specifically point out the most important records that must be up to date at any given time.
  
• Forbidden Acts: This is an interesting provision that can actually restrict the members or managers of an LLC from specific acts, such as ones that would prevent the business from operating. Generally the punishment for these acts will also be spelled out, such as an involuntary withdrawal from being a member of the LLC. 

These rules are not a catch-all for what is included in all operating agreements but it should give you a good idea of what needs to go in yours. If you’re still not sure then you should contact legal counsel or an experienced company that helps business register LLCs. 

When is an Operating Agreement Required? 

The requirements for operating agreements vary greatly by state. Many states don’t require you to create an operating agreement when you register your LLC, but some do. For example, Alabama, California, and Ohio all require you to have an operating agreement if your LLC has more than a single member. This is contrary to other states like Colorado and Connecticut that require an operating agreement for single-member LLCs. If you’re not sure which state to incorporate in, these are the types of things you should be thinking about. Consider our guide on where to form an LLC. 

The best action for any LLC is typically to have an operating agreement in effect. If you choose not to draft and execute an operating agreement then your business will be at the mercy of the state operating laws. This isn’t an ideal situation because you won’t be able to clearly define the operating procedures that are important to you and your business. 

You may even want to have an operating agreement if you’re the only member of your LLC. Establishing an LLC and including an operating agreement with specific business operating procedures should fully establish your business from being a sole proprietorship and help you further separate your personal and business legal liability. 

Register Your LLC & Get an Operating Agreement

Even if your state doesn’t require you to have an operating agreement, it’s a best practice to create one when you register your LLC. This is to make it clear how the operating procedures work within your business, even if you’re just a single-member LLC for now. Operating agreements can help protect your business from unfavorable laws or yourself by providing a shield of liability that the courts recognize. When you register your LLC at MyCompanyWorks, you’ll get an operating agreement for your state! 

Obtaining a business license varies by state and in some areas it varies by city or county. In fact, even the types of business licenses that you’re required to get might vary based on your geographic location. The basic process of obtaining a license can be outlined in a simple three step process: research, submit your application with any required fees, and display your business license. 

Business licenses can cost between $10 and $500 or more, depending on the type of license you need and where your business is located. A simple business registration license is typically a way for states to know who is operating within the state while more serious licenses, like a liquor license, is a way for states to regulate potentially dangerous substances. 

Before you can apply for a business license in most states, you’ll need to legally register your business with the state. This means preparing and filing all of your LLC or corporation documents and making sure the state files the documents. MyCompanyWorks can complete this process for you in just three easy steps. Get started today by filling out a simple online form. 

Obtaining a Business License in 3 Steps

There isn’t a one size fits all process for obtaining a business license. The process will always depend on the type of license you’re applying for and where you live. However, we’ve outlined a basic process that can be followed to first understand what your requirements are and second to complete all needed application materials. For the purposes of this process we’re going to assume that you need a basic local business operations license. 

Step 1: Research Your State, County, & City Requirements

The first step in the process is to research whether you need a business license or not. Most businesses that need to obtain a business license will have physical locations within the city or county. Typically this is defined as an establishment that local citizens can walk into. Some home-based businesses are also typically required to obtain a license. The types of home-based businesses that generally need to get a license include: 

• In-home childcare or preschool
• Any business that has clients or customers physically coming to the home
• Any business that is required to obtain a license by a government entity based on the industry the business exists within

All business owners should consult with both the state government and the local government to determine all business license requirements. The last thing you want is to get your business shut down after you’ve opened your doors because of a failure to obtain the proper licenses. 

For a basic business license, most states will either set the rules or allow the local government to set them. In most situations you won’t have to pay fees and register with both legal entities just to open your doors. However, as more license needs occur you could be working with multiple layers of government or multiple agencies at the state government level. 

For example, a local bar may be required to obtain a normal business license from the city the bar is located in but will also be required to obtain a liquor license directly from the state. This is pretty standard and you should plan for anywhere between a few days and one month to obtain a business license, depending on the type of license you need. Some states may take even longer to process applications for potentially dangerous licenses, like a liquor license. 

Step 2: Complete Application Requirements & Submit All Fees

As soon as you know what the requirements are for your state you need to collect all required information and fill out all application forms. Keep in mind that if your business has multiple physical locations then you may end up having to complete the license paperwork once for each location, especially if they are in different cities or counties. 

Once you’ve completed the paperwork you should have a professional look it over to make sure you’ve done it correctly, or at least someone who can provide a second pair of eyes. If you’ve put the right signatures on the documents and have included all requirements then you should now submit the documentation with any required fees. 

Some states will require you to fill out the paperwork and bring it into a local office while others will let you mail in the paperwork or even fill out all of the documentation online. Regardless of the method each state allows you to submit the paperwork, you’ll likely get your license in the mail within a certain period of time. 

Step 3: Receive Your License & Display it in Your Business

Once the state or local government is satisfied with your paperwork they will process your application and deposit your fee money. The officials will then, finally, print your business license and send it to you. You need to read over any information that is given to you very carefully when you receive your license. 

Many states will require you to properly display your business license for all of your customers to see. There could be very specific rules with how or where you need to display the license. For example, you may have to display it within typical eye-level of your customers and within ten feet of the front door, or right behind your main check-out area. Regardless of the rules, it’s important that you follow them to the letter of the law or your license could quickly be revoked. 

Types of Business Licenses

While most businesses will need a general operating license, there are many different types of business licenses that you might need to successfully operate your endeavor. The types of different licenses you need will depend on what industry your business is in and on what you sell. The types of business licenses you might need include: 

• Local Operating License: This is the type of business license we discuss above, and the most common license businesses apply for.
  
• Building Permits: You may be required to get a permit, or license, for any remodeling work that might be needed within your business’s location.
  
• Zoning Permit: The local government will need to approve your use of the land you’re operating on for the specific type of business you’re operating. For example, if you’re in a retail zone and want to open a manufacturing operation then it may take some convincing of local politicians.
  
• Fire Department Permit: This permit is essentially passing a test by local officials that says your building is structurally sound and you’re given a maximum occupancy that is safe in the event of an emergency.
  
• Health License: These are typically needed by restaurants or food establishments.
  
• Sign Permits: You’ll likely need to get approval of the city for any exterior signs in terms of size and possibly color or other specific decor.
  
• License to Serve Alcohol: You’ll need a license to serve alcohol that will be consumed at your business and a separate license if you’re going to be selling alcohol that isn’t consumed there.
  
• Seller’s License: You may be required to get a specific license, depending on the types of goods that you’re selling to consumers.
  
• Occupational License: If you’re a business professional then you’ll be required to register as one and make sure you’re properly licensed before opening your doors.

In addition to all of the permits and licenses above, you may be required to apply for some business licenses that are regulated by the federal government. If you’re in certain industries then you should make sure there are no federal licenses that you must obtain. These industries include: 

• Aviation
• Mining or drilling
• Public transportation
• Logistics (including maritime)
• Agriculture
• Fish and wildlife
• Nuclear energy
• Broadcasting 
• Firearms or explosives

The key to covering your business properly is to make sure that you’ve exhausted the levels of government to make sure you’re obtaining all the licenses your business needs. You can either hire a professional attorney to help you through the process or you can reach out and communicate with your local government officials to get specific requirements. 

Get Started Today

Before you complete your business license research you should make sure your business paperwork has been completed with the state. This means starting your LLC and filing all appropriate documentation. MyCompanyWorks will complete all of your required documentation and submit it to the state where you business exists for you. You can get the process started today by filling out a quick online form. 

In addition, we offer a Business License Compliance Package that does all of the tedious research for you and gives you all the forms and instructions in one simple online dashboard to complete and submit to the proper authorities.

Corporate bylaws are the legal rules a corporation is operated by after the business if formed. Once the organization has a legal entity that has been filed with its state, the board of directors will typically decide on the bylaws which the company will live by going forward. Some examples of bylaws include listing a registered agent and defining the classes of stock for company ownership. To see what bylaws look like, you can see Microsoft’s at this link.

One of the main reasons LLCs became so popular for small businesses is that bylaws and other corporation complexities are not required. Instead, the business creates an operating agreement at the time the legal entity is formed. Many states don’t even require an operating agreement for an LLC to be formed and start operating. If you’re interested in forming an LLC you can learn more about your state’s requirements by checking out are State Startup Guides.

Why You Need Corporate Bylaws

Bylaws help ensure that your corporation runs smoothly. These rules outline the internal rules of your business, from a legal standpoint. The bylaws outline how decisions are legally made, who gets to vote, and the structure of how it works. If your business is very large, or you plan for it to be, then this will be helpful to make sure there’s organization to the chaos of both making big decisions and having a large ownership structure. 

The bylaws are important for all corporations to have, especially if you end up becoming a publicly traded one. This is because the bylaws outline how the official books are to be kept and what the reporting timeline looks like. Anyone wanting to invest in your business will want strict rules around how they’ll be able to keep up to date with what’s happening inside the organization’s performance. 

The bylaws also outline how the stock of the company is going to be divided up. It’s important for any business that plans to sell stock or take on investment money in the future to have a strategy behind the various classes of stock and how those stocks are transferred between owners. There also needs to be set rules around qualifying stockholders and knowing exactly who has a right to make business decisions and who doesn’t. 

However, the main reason you’ll create bylaws when you’re still a smaller company is because it’s required for all corporations to do so. What many small business owners don’t know is that you can start out as an LLC, which has more relaxed rules, and then as you start to grow you can switch to a corporation later. If you’re unsure of what the success of your business might be then this might be your best bet. 

Note: As of the date of publication, the only states that require your LLC to create an operating agreement are Delaware, New York, Maine, California, and Missouri. 

Example of the Benefits of Bylaws

All states have rules around how businesses are meant to operate and interact. If you’re not required to create bylaws, or an operating agreement for LLCs, you might still want to in order to counteract some rules in your state.

For example, some states might have a default rule that all profits are evenly distributed or that the legal responsibility for a company’s actions is evenly distributed among shareholders. In many cases you can actually get around these rules by having very strict bylaws that says the profits or legal responsibility is broken down much differently than the state’s rule. 

How Corporate Bylaws Work

Bylaws are pretty straightforward, like most legal contracts. The bylaws are not registered with your other incorporation documents that you provide to your state, but they can be equally important to operating your business. While you don’t legally file the bylaws with your state, it doesn’t make them any less enforceable. The bylaws are binding as soon as a majority of the board of directors votes them into action. 

The size of your corporation’s bylaws will heavily depend on the size of your business. You may want more relaxed bylaws early on and then you may want to enact more strict rules right before you take the company public. Things like the number of directors the business has will also have a necessity to change as time goes on and you grow in both revenue and employee count. 

Typically whatever the bylaws say is the law for your business. Legal entities typically have the right to operate internally in anyway that the majority of shareholders agree to. This means that while you’re legally bound to your bylaws, you have a lot of flexibility in how you can setup your business to operate the way you need. 

How Corporate Bylaws are Created

The creation of bylaws is simple from a legal standpoint. All you have to do is draft them and get a majority of the board of directors to vote “yes” on enacting the document. There aren’t a lot of rules that restrict you on the actual creation of your bylaws in terms of what can be included in them, but there are many common things that you should include to make the legal operation of your business clear and concise. 

Common Corporate Bylaws

Some of the most common corporate bylaws include:

• Your Business Management Structure: How many Directors will your business have? Who has the legal authority to make binding decisions for the business? Who is ultimately responsible for legal or tax filings and who is the contact person or group for your business?
  
• Your Business’s Registered Agent: If your business is going to receive legal notices or documents in the future then they will be sent to your registered agent. It’s important to keep this part of your bylaws up to date so that you don’t miss an important legal notice. Whomever you have in your official bylaws is the only person or group that has to be contacted for notice to be given to you.
  
• Classes of Stock: How much stock do you have in the business initially, what classes are there, and what are the rights and privileges of those classes? This is extremely important if you’re bringing on outside capital or going public.
  
• Voting Rights: This should be called out specifically so it is clear who has the legal opportunity to weigh in on big business decisions, like taking on outside capital or selling the business.
  
• How the Business Can Be Dissolved: This is important to include so that the only ways to dissolve the business are clear to everyone, regardless of any state statutes.
  
• Corporate Meeting Information: How often do the directors meet and what is the purpose of those meetings? Are these meetings the only time that big decisions can be made and if so, can the board of directors call a special meeting to vote on something important? How do you give notice of meetings to directors? These are all important things to spell out so that there is no internal legal dispute amongst shareholders.
  
• Dividends: If the shareholders have a right to dividends then it should be spelled out in the bylaws on when they might receive one and how it would be dispersed.
  
• Amendments: Any specificity you can provide on how amendments to the bylaws are enacted in the future will be important to make sure it’s clear how things can adapt and change over time. 

This list isn’t all-inclusive for every business. If you need complex bylaws, you should partner with a lawyer that is experienced in setting up businesses and enacting bylaws for many different types of businesses. 

Does My Business Need Corporate Bylaws? 

The real answer to whether or not your business needs bylaws is that it really depends. If you’re starting a corporation then you’ll need to draft a set of bylaws. However, if you’re a smaller business or unsure of what direction you want to take your new business, then you may benefit from starting out as an LLC, which means you won’t need corporate bylaws. We do recommend that you still craft an operating agreement, even if it’s not required in your state, especially if your business has more than one owner. 

Getting Started With Corporate Bylaws

Whether you’re getting started with your corporation and need to enact specific bylaws for your business, or you instead want your legal entity to be an LLC, we can help. My Company Works has completed over 60,000 legal business formations and our packages include an Operating Agreement (for LLCs) and Bylaws (for a corporation).

Transferring real property, or other assets, into an LLC or corporation can help you protect yourself from personal liability. This is typically done with property you anticipate having another party involved with in some way, such as a rental property. Transferring property can help protect you from personal legal liability.

The process for transferring property to your LLC is similar to selling your property to a another party. You’ll just need to completely transfer ownership to the corporation instead of an individual, like in the event of a sale. It’s a simple three step process that we detail below.

Step 1: Form an LLC or Corporation

You can’t transfer your real estate property, or any other personal property, into your LLC or corporation until you’ve actually formed a new legal entity. This can be a complicated process if you’re not familiar with the proper documentation or if you’re not up to speed with your state’s rules and regulations. Typically you’ll need to register a business name and file the LLC or corporation paperwork with your secretary of state’s office.

NOTE: For the remainder of this article, when we refer to an LLC, the same concept applies to a corporation.

If you haven’t completed this process before then you’ll want someone familiar with the formation documents involved, especially if you have any partners or other members of your LLC. You don’t want to lose any of your own rights to the property because you weren’t sure how to structure the LLC or what basic clauses you needed in your partnership paperwork.

Using an experienced company,like ours that has completed 60,000+ business formations, is important to make sure you’re completing the LLC formation process correctly. Getting an LLC formed and filed isn’t necessarily difficult but it does require a certain level of expertise to make sure nothing is missed that could hurt you or your business later.

Step 2: Complete a Quitclaim Deed

At this point you may want to consult with an attorney to make sure you complete the right deed for your personal property transfer. If you’re transferring real property than most of the time you’ll want a quitclaim deed that shows this transfer of ownership. When executed, a quitclaim deed transfers any interest the grantor has in the property to a grantee. In this case, you will be the grantor and your LLC or corporation will be the grantee.

There may be certain laws surrounding compensation for the transfer in your state, which is another reason you may want to consult an attorney. The laws would be what compensation is required when transferring property from one party to another. There also could be a transfer tax, depending on your state, if there is no compensation paid from the LLC for the property.

Step 3: Record Your Quitclaim Deed

In order to receive full legal protection for your personal assets when you transfer the property to your LLC you’ll need to record the deed at your local city or county clerk’s office. This recording creates a public record of the property transferring from you to the LLC, so the world is put on notice that you no longer own it and can’t be held responsible for anything that happens with it.

Recording the deed requires either going down to your local clerk’s office or mailing the paperwork, depending on the rules of your state, and then paying a nominal fee. This is an important step that must be done because otherwise there is no notice to third-parties that may have a legal dispute with the owner of the property in the future, which is a legal requirement to pass legal liability to a new owner.

Other Steps to Take When Transferring Property to Your LLC or Corporation

While the required steps to transfer property to an LLC don’t make for a long list, there may be more things you need to consider and take care of that depend on your situation. Not every single person looking to transfer property to a legal entity will need to complete these tasks, but they should be understood to make sure they aren’t a necessary step for your process.

Additional steps you should keep in mind if you decide to transfer personal assets to an LLC include:

1. Change Any Property Leases: If your property is being rented out, and you’re already under contract with a tenant, then you need to make sure you change all legal documents and leases to note who now owns the property (the LLC). In fact, you may want to just get brand new leases signed that are in the name of your LLC instead of yourself.
   
   
2. Notify Your Lender: If you have a mortgage on the property then it is likely that you have some language in your agreement that stipulates a requirement of you notifying them when ownership changes. This could cause a rate increase, but you always want to make sure you’re being compliant with previous agreements.
   
   
3. Obtain a Tax ID Number: You may not have to obtain a tax id number, but chances are that if you’re wanting to move property into an LLC then you’re likely doing something that requires this to happen. If your LLC has more than one owner, if you have employees, or if you meet other requirements that vary by state then you’ll need to get this tax ID number when you create your LLC.
   
   
4. Open a Business Bank Account: Opening a business bank account will help you further separate your personal assets from the assets in your LLC. If you move personal assets into an LLC to protect yourself legally then you won’t want to put that at risk by mingling your personal and business funds into a single account. Instead, open a business bank account to keep it all separate and keep your other personal assets safe from anything that happens with the LLC.

Pros & Cons of Moving Property Into an LLC

There are things you need to keep in mind when you decide to transfer personal assets to an LLC. For example, your actions may result in certain tax consequences, which we’ll summarize below. While the legal protections are nice, it’s also important to note that you may end up hurting yourself financially if you decide to transfer a property you currently have a mortgage on. We detail the most important pros and cons of transferring personal property into an LLC below.

Pros of Moving Property Into an LLC

The pros for moving property into an LLC include:

• Personal Liability Protection: If you’re dealing with another party with your property, like having a renter, then it makes a lot of sense to use an LLC or corporation to shield your personal assets from anything that may happen with the property. This way if there is a lawsuit later over an event on the property, like an accident, then no one will hopefully be able to come after your personal assets, like your personal home, for damages.
  
  
• Protect Your Property From Your Property: If you have multiple properties that you’re renting out then it is a benefit to keep each one in a separate LLC or corporation in order to shield each one from potential liability of the others.
  
  
• Tas Advantages: There can be certain tax advantages to owning real property in an LLC and running any money making activities with that property as a business. This is something you should consult a CPA on to determine what could be the most beneficial to you.
  
  
• Better Defines Partnerships: If the property you’re moving is jointly owned by more than just yourself, then moving it to a multi-member LLC or corporation is beneficial. Not only can there be tax benefits this way but it also clearly defines the ownership and management responsibilities within the legal entity. This makes your partnership much more clean and easy to navigate, especially if anything goes south later.

Cons of Moving Property Into an LLC

The cons of moving property into an LLC include:

• Tax Consequences: While there can be certain tax benefits, there can also be certain tax consequences of moving property. You may incur a delayed tax consequence or if multiple people own the property then you could trigger a tax event for someone else. Make sure you speak with a CPA to fully understand how this could help or hurt you from a tax standpoint, and consult with any partners to make sure it works for them.
  
  
• Mortgage Rates Could Increase: Many owners of rental property will get a good rate on their mortgage by purchasing the property as an individual. If you later transfer the ownership over to a business, then you would likely no longer qualify for the much lower rates your lending institution gives to individuals. You probably have a legal obligation to share this transfer to your lender, but when they find out it could cost you a lot of money by your rate being increased.
  
  
• Insurance Costs Could Rise: One thing that many people don’t consider when transferring property to an LLC or corporation is insurance. If the ownership of your property changes to a business then your insurance carrier could make you change any current personal insurance policy to a commercial policy. These commercial policies typically have much higher premiums, because of the nature of businesses to litigate more frequently than individuals.

Getting Started

As we mentioned above, the first step to transferring property to an LLC or Corporation is to register your LLC or corporation. You can do this today by letting us help. It’s a simple three step process where you select your company type and state, you fill out a simple online form, and we send you back all of your paperwork. Get started today so you can realize the legal protection of an LLC with your property!