Protecting your assets and avoiding double taxation are some of the top benefits of creating an LLC for your rentals. Have you considered running your business separately from your personal affairs?
Running your rental business under a Limited Liability Company can help you keep more money in your pocket. Maybe you have considered it in the past but don’t know how to create an LLC.
Want to learn how to protect your assets and avoid double taxation? Here are the steps you should follow to create an LLC for your rental business.
1. Contact Your Lender
Does your rental property have a mortgage? If so, you should contact your lender before creating a Limited Liability Company.
Some lenders don’t allow you to transfer the title of a mortgaged property. The financial institution may also charge an assumption fee for the transfer, or increase your mortgage interest rate.
2. Consult an Expert
Before you create an LLC, you should consult an attorney or an accountant. A legal expert will tell you everything about how to create an LLC in your state and any requirements you must meet. An accounting professional will provide insight into any potential tax liability and how to handle your finances to protect your assets.
You may also consult investment property services to learn if a real estate LLC is the best call in your state. Their vast experience in your market allows them to provide hands-on advice about how to take your real estate business to the next level.
3. Find an Available Business Name on Your Department of State Website
To create an LLC, you must use an available business name. You can find one by searching your Department of State website.
They’ll charge you a fee for each search. If you’re unsure about the best name, you may consider using the property address as your business name or consult your attorney.
4. Draft Your LLC Operating Agreement
Before registering your LLC, you’ll need to draft an operating agreement. This document establishes the responsibilities and obligations of each LLC member.
You should consider hiring an attorney to draft this agreement. A legal expert will help you set the best ground rules to protect your assets and every member of the LLC.
5. Create Your Real Estate LLC
Once you have your operating agreement, it’s time to register your real estate LLC with your state. You should also request any necessary licenses required by your state to operate your real estate business. Your attorney can register your company and offer insight into the applicable state licensing requirements.
Is Creating an LLC for Your Rental Property the Best Call?
Depending on your location, creating an LLC for your real estate business may be the best call. LLC laws vary on a state basis so it’s recommended to consult an attorney or accounting expert before pulling the trigger. These experts can tell you more about the requirements and benefits of a real estate LLC.
Remember that you should also contact your lender if your rental property has a mortgage. Some lenders don’t allow you to transfer the property title to an LLC.
While it may seem overwhelming, we’re confident that if you follow our step by step guide you’ll make the best decision to take your real estate business to the next level.
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