How to Start an LLC for Rental Property

Why you need an LLC for this

• Tenant injury lawsuits stay with the property, not your personal assets
• Each rental in its own LLC isolates risk — one bad property can't sink the others
• Cleaner taxes: rental income flows through to your personal return on Schedule E with no extra entity-level tax
• Easier to add a partner or sell the property later — you sell the LLC, not the deed

The tax angle

An LLC owning rental property is almost always taxed as a pass-through. You'll report income on Schedule E. Don't elect S-corp taxation for passive rentals — the IRS treats rental income as passive, and an S-corp election can actually raise your tax bill and add payroll headaches.

Step-by-step

1. Step 1
   Pick a state to form in

   For most landlord owners, your home state is the right answer. Forming in Delaware or Wyoming sounds clever, but if you operate from another state you'll have to register as a foreign LLC there too — double the fees and paperwork.

2. Step 2
   Name your LLC

   Search your state's business database to make sure the name is available. It must include 'LLC' or 'Limited Liability Company.' Avoid restricted words (Bank, Insurance, etc.) unless you have the right licenses.

3. Step 3
   File your Articles of Organization

   This is the legal document that creates your LLC. Filing fees range from $40 to $500 depending on the state. Most states process online filings within a few business days.

4. Step 4
   Get an EIN from the IRS

   Free at IRS.gov. Takes 5 minutes. You need it to open a business bank account, hire employees, and file taxes.

5. Step 5
   Open a business bank account

   Critical for the liability shield. The moment you mix personal and business money, a lawyer can argue your LLC is a sham and pierce the veil. Keep it separate from day one.

6. Step 6
   Transfer the deed (or buy in the LLC's name)

   If you already own the property, you'll need a quitclaim or warranty deed to move it into the LLC. Talk to your lender first — most mortgages have a 'due-on-sale' clause that can be triggered by a transfer.

7. Step 7
   Skip all of that and use Tailor Brands

   Tailor Brands files your Articles of Organization, gets your EIN, sets up your registered agent, and drafts your operating agreement in one flow. Most people finish in under 15 minutes. If you'd rather not deal with state websites, this is the fastest path.

What people get wrong

• Triggering your mortgage's due-on-sale clause by transferring the deed without telling the lender
• Forgetting to update the landlord insurance policy to name the LLC as the insured
• Running personal expenses through the rental account — instant veil-piercing risk

FAQ