Owning real estate in the name of an LLC operating agreement for real estate investors is often a savvy, legally-sound method to help insure against liability and asset vulnerability. In other words, when a piece of real property is owned by an LLC – as opposed to an individual person – only the LLC is “on the hook” in the event of damage or injury.
One of the keys to fully protecting the LLC and its members from unnecessary exposure to liability is designing an LLC agreement for real estate investors specifically, as this industry carries its own niche issues and unique legalities.
Here at Lex Launch, we not only assist with the filing of formal incorporation documents, but we help our clients create an operating agreement to help limit that unnecessary exposure. With our fair prices and well-educated legal consultants, your real estate investment LLC will be ready to launch in no time.
What is an Operating Agreement?
As the name suggests, an operating agreement is a legal contract between the members of the LLC in which each member agrees to conduct business in a certain way. Under Kansas laws, an operating agreement is not necessarily required in order to form a valid LLC. However, the legal implications of operating without one simply aren’t worth it.
For a real estate investor, an LLC operating agreement may address any of the following categories unique to this business:
- A mission statement or clause specifically describing the nature and purpose of the business as dedicated to the ownership, sale and/or transfer of real property. This statement can be as detailed as necessary to include all facets of the LLC’s operating functions, including the right to renovate, enter into a landlord/tenant relationship or executing a mortgage in the name of the LLC.
- A directive that all property purchased or acquired by the real estate LLC shall be titled in the name of the company only, and not in the individual name(s) of any member.
- A statement referring to the amount of capital contributed by each member – including each member’s correlated ownership stake.
- The ways in which distributions of profits shall be divided among members, and the procedure for doing so.
- A list of activities the LLC is permitted to engage in to advance its purposes, including borrowing money, engaging in legal proceedings, liquidating assets, and any other activity the membership deems appropriate.
- Ways in which the LLC may be terminated or the procedures a member must follow to relinquish their ownership
As you can see, an operating agreement is more than just a simple document. This type of agreement can come into play years later in the event of a dispute between members or with another party – so proper drafting is vital.
Contact Lex Launch Today to Create a Strong LLC Operating Agreement for Real Estate Investors
If you are at the inception of a real estate investment business and want to make sure your LLC has a proper operating agreement, contact Lex Launch today.
We can help you transform your concerns and legal questions into a strong LLC operating agreement for real estate investors appropriate for a Kansas LLC venture. Get started today!