Many investors use rental property to create “passive income.” Investors can buy apartments, commercial property or even single homes to then rent out to tenants. While these properties can produce cash flow, they can also leave the owner with personal liability for the business. Putting your rental properties into an LLC will limit your personal liability with a very small initial setup cost. You can even form an LLC online for a fraction of the price of meeting an attorney in person.
Choose an available LLC name in your state. When forming an LLC, you need to pick a unique name that no other company is using as this name will appear on all of your documents and banking information.
Find an online LLC vendor or contact an attorney. You can work with an attorney one-on-one or form your LLC online by yourself. You’ll need to supply some basic information such as business address and the names and contact information of the owners.
Pick your statutory agent and pay your filing fees. Every LLC needs a registered agent on file with the state, who will be the person to receive legal correspondence on behalf of the company. When applying for an LLC, most states charge a fee that must be paid at the time of filing.
Start operating your rental property under the LLC. The next time you take on a tenant, change all of your rental property forms and contracts to the name of your LLC instead of your personal name. Henceforward, the LLC will be liable for those contracts and you personally will have limited liability.
Start a bank account for your LLC. Your LLC is its own entity, so it can open a business checking account to receive the rental income, pay the rental property expenses and debt service and pay profits to you as the owner.
I had someone ask me today about using an LLC for their rental property. I personally use Keyt Law in Arizona http://www.keytlaw.com/ – I think they do a nice job.
I use LLCs to protect me financially. Here is a great link to FAQs about why you should use an LLC to purchase real estate: http://www.incorporate.com/real_estate_faqs.html