If you own rental property, creating Limited Liability Company (LLC) to manage your property is a great way to protect your assets. LLCs provide Pass-through taxation and help you keep your personal expenses separate from your business expenses. In this post, we will walk you through the steps you can take to create an LLC.
Although the requirements differ state by state, regardless of the state, here is the step-by-step basics guide to creating an LLC.
1. Get in contact with your lender and check if you will be allowed to transfer title to your LLC. Some lenders charge an assumption fee or increase the interest rate.
2. Choose an available name for your business. The business name you choose must comply with your state rules for LLC names. You can go to your Secretary State’s web page to search for an available business name.
3. Next, create an LLC Operating Agreement, this outlines the responsibilities and rights of each LLC member
4. Get the necessary permits and licenses for your business. And in some states, you’re required to publish a notice in a local newspaper
5. Register with your state
6. Transferring title to the LLC means transferring your rental property’s ownership to the LLC
7. Now create a Quit Deed with the LLC as the Grantee and you as the Grantor
8. File the deed at you County Clerk’s website
9. Set up a bank account for your LLC.
10. Moving forward, you should update your rental leases, and it should state the LLC as the owner
11. Go online and learn more about drafting rental leases
12. Deposit rent payments in the bank account you set up for your LLC
The cost of creating LLC is different from state to state, but these are the possible costs.
· It can cost you anywhere between $50 to $630 to register your LLC
· You need approximately $40 to publish a “Notice of Intent.”
· Depending on the lawyer you hire, the cost of creating an Operating Agreement is anywhere from $0 to $1000
· For title transfer, you may be charged tax – this is based on the percentage of the money you transferred
· Filling fees are typically under $50
· The annual franchise tax is between $250 and $800
· For owning LLC, the Annual fee can cost $9 to $500
· As a result of transferring title, your interest rate may increase
· Depending on the value of your rental property when transferring title, title transfer may trigger tax consequences