Real estate · LLC guide · updated
How to start an LLC for a rental property
A rental property is a building strangers live in. A tenant who falls on the stairs, a guest hurt in the pool or a mold claim can lead to a lawsuit against the owner. Holding the property in an LLC keeps that claim to the property and the LLC, and keeps your other properties and personal assets away from it, as long as the LLC is kept separate.
Our registered agent is optional: $74.25 a year, the same at renewal. Questions first? Ray or Vinny picks up at (954) 470-8356.
- EIN
- Deed to LLC
- Landlord policy
- Rental registration
- Lead disclosure
Rental Property businesses in the U.S.
Source: U.S. Census Bureau, County Business Patterns 2022 (NAICS 531110) and U.S. Census Bureau, Nonemployer Statistics 2022 (NAICS 5311), the latest U.S. totals.
Why rental property owners form an LLC
Tenant and guest injuries
Premises claims are the main reason landlords use LLCs.
Habitability and mold
Repair disputes and mold claims can bring both damages and code fines.
Fair housing complaints
Advertising, screening and accommodation decisions are covered by federal and state fair housing law.
An LLC keeps the company's debts and claims away from your personal assets when you run it as its own business: its own bank account, contracts signed in its name, and no mixing of money. It does not cover your own negligence, and lenders often ask for a personal guarantee. Insurance comes first.
Licenses and registrations for a rental property
Federal items link to the agency's own page. State and local rules vary, so pick your state at the top for your state's business portal. Tick items off as you go; the list remembers your progress on this device.
- We do thisForm the LLC and get its EINAlmost every registration above asks for the company's legal name and EIN, so this comes first. We file the LLC with your state for $123.75 plus the state fee, and can get the EIN for $41.25; the IRS also issues it free online.
Insurance and taxes to plan for
Insurance
- Landlord (dwelling fire) policy
Homeowners policies do not cover rentals. The policy should name the LLC.
- Umbrella liability
Adds coverage above the landlord policy.
- Loss of rents
Pays rent you lose while a damaged unit is repaired.
Taxes
- Schedule E and depreciation
A single-member LLC rental is usually reported on your personal return on Schedule E, with the building depreciated over 27.5 years. IRS / agency page
- 1031 exchanges
A single-member LLC is ignored for tax purposes, so you can usually exchange property held by your LLC into another property held by you or another disregarded LLC.
Most mortgages let the lender call the loan if the property is transferred. The federal Garn-St Germain Act protects transfers to a living trust, not to an LLC. Ask your lender before you deed a mortgaged property into an LLC, or buy new properties in the LLC from the start.
Forming the LLC itself: 7 steps in every state
- 1. Check the name
- 2. Name a registered agent
- 3. File with the state
- 4. Sign an operating agreement
- 5. Get an EIN
- 6. Open a bank account
- 7. Keep it in good standing
The filing office, fee and yearly report change by state. Open your state's step-by-step guide.
What it costs to form a rental property LLC
| Cost | File it yourself | With Vermilion Vitez |
|---|---|---|
| State filing fee (paid to the state) | $35 to $520 | $35 to $520 |
| Filing service, operating agreement included | $0 | $123.75 |
| EIN from the IRS | $0 | $0 yourself, or $41.25 if we get it |
| Registered agent, per year (optional) | $0 if you serve yourself | $74.25 |
State fees as charged at our checkout. Industry licenses, permits, bonds and insurance above are separate and set by each agency. Checkout shows the card processing fee before you pay.
Frequently asked questions
Should each rental property have its own LLC?
Many investors use one LLC per property, or a few properties per LLC, so a claim at one property cannot reach the others. More LLCs mean more state fees and bookkeeping. Some states offer series LLCs as a middle option.
Can I put a house with a mortgage into an LLC?
You can, but the transfer can let the lender call the loan under a due-on-sale clause, and the federal exception for living trusts does not cover LLCs. Talk to your lender first.
Will an LLC change how my rental is taxed?
A single-member LLC usually does not. The rental stays on Schedule E of your return. A multi-member LLC files a partnership return.
Do I need an LLC to get a rental property loan?
No, but DSCR and commercial lenders often prefer or require one. Conventional mortgages usually require personal ownership.
How much does it cost to form an LLC for a rental property?
Your state's filing fee ($35 to $520 depending on the state) plus $123.75 if we file it, with the operating agreement included. Industry licenses, bonds and insurance are extra and set by each agency.
Is this page legal or tax advice for my rental property?
No. It summarizes public rules in general terms, with links to the agencies that set them. For your situation, talk to a licensed attorney or CPA, or book a free call with us.
Related industries
Ready when you are
Have us file your Rental Property LLC
$123.75 plus your state's filing fee, with the operating agreement included. Checkout shows the full total, card processing fee and all, before you pay.
Rather talk first? Call Ray or Vinny at (954) 470-8356.