Legal Question in Business Law in California

Forming an LLC as a real estate licensee

I'm considering starting a home-based business for real estate investing. At the same time I planned to have my real estate broker's license by the end of the year to work as a loan officer. I'd like to use the LLC structure for my investing business but have heard that real estate licensees cannot use the LLC to conduct their business. However, since the activities I plan to do in my business (wholesaling property by assignment of contract) don't require a license, can I still form an LLC even though I am licensed for my other job? Would I need to form an LLP instead? Is there a business structure that would be better? What are my liability issues for investing in real estate and holding a license at the same time? Thank you for your time.


Asked on 9/14/04, 2:03 pm

3 Answers from Attorneys
Ken Koenen Koenen & Tokunaga, P.C.

Re: Forming an LLC as a real estate licensee

An LLC cannot hold or operate in ventures requiring a real estate license. You could establish a Subchapter S Corporation to hold the license.

You could set up the LLC to do your investing business, but any transaction that you enter into will require a disclosure that you are a licensed real estate agent, even if you are not doing the transaction as a realtor.

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Answered on 9/14/04, 6:17 pm
Scott Linden Scott H. Linden, Esq.

Re: Forming an LLC as a real estate licensee

There may be some extra loopholes that you have to jump through when making purchases and sales, such as formal notices, but other than that I am not sure why you question your ability to form as an LLC.

We have a real estate client who formed an LLC and does equity purchases. There are many constraints, but he has been quite successful in his venture.

If you require additional assistance in the formation of your company or if you need additional structural advice, please do not hesitate to contact me at 626-578-0708 or online (where you can an idea of what documents you will need in the future - handbooks, etc) at www.CorporateProtectionServices.com

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Answered on 9/14/04, 2:48 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Forming an LLC as a real estate licensee

There is no prohibition against a licensed real-estate broker also carrying on a real estate investment activity for his or her own account. As you will know from your broker training, there are some disclosure duties.

You are also correct that the DRE does not currently allow a real estate business to be conducted by an LLC. Corporations, however, may be licensed to conduct a real estate business based upon a licensed officer, and there is an application and licensing process for that.

You can form an LLC for nearly any business that doesn't require a license, but I cannot express an opinion as to whether your idea of "wholesaleing property by assignment of contract" requires a license or not. It sounds to me as though it may, and I would advise you to get an opinion from a real estate lawyer who has had an opportunity to review your proposed activity in some detail.

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Answered on 9/14/04, 3:10 pm


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