Creating a Rental Property LLC in Louisiana

What to know before creating a rental property LLC in Louisiana

There are three key reasons why you should form a rental property LLC in Louisiana. First, a rental property LLC in Louisiana provides a degree of legal protection to its owners by reducing their personal liability. With personal liability protection, an LLC’s owner’s personal assets are protected in the event of a lawsuit.

Second, LLCs provide pass-through taxation. This means that the owners of an LLC pay tax only one time. When they do pay tax for the LLC’s revenue, it’s at the owner’s personal income tax bracket, not Louisiana’s corporate tax rate.

Finally, LLCs provide a clear separation between property the business owns and the personal assets of its owners or members. This separation is important for both financial and legal reasons. 

Series LLCs

A series LLC is a different kind of LLC that is similar to a corporation that has subsidiaries. To form a series LLC, you would set up a “parent” LLC first. Then, you could form smaller LLCs within that parent company — each with its own ownership interests, accounts, and records.

There are advantages to forming such a company, however, Louisiana does not recognize series LLCs. However, it’s good to know that such a thing exists in the event that you buy property in a state that offers this type of business entity.

How to form your LA Rental Property LLC:

Step 1: Choose LLC Name

 When selecting a name for your LLC, be sure to choose one that meets Louisiana’s requirements. We can do a business name search for you to see if the business name you want is available. If it is, let us reserve the name while you get the filing paperwork together. 

Step 2: Select Registered Agent

Businesses in Louisiana are required to appoint a registered agent. This person is responsible for receiving important documents on behalf of the LLC, such as state correspondence and legal notices. If you need a Louisiana registered agent, we can help you find one.  

Step 3: File Articles of Organization

To officially form your rental property LLC in Louisiana, you need to file Articles of Organization with Louisiana’s the Secretary of State and include the appropriate filing fee.

Step 4: Create an Operating Agreement

An Operating Agreement governs how your LLC runs and provides instructions for anything from voting procedures to dissolve the company. If you’re not sure how to create an Operating Agreement, we offer operating agreement templates that can serve as a guide. 

Step 5: Apply for Employment Identification Number (EIN)

The IRS assigns businesses a nine-digit EIN that is used to identify their enterprise. An EIN is like a social security number for your LLC. Having one is necessary for certain business matters, such as opening a business bank account, hiring employees, and getting financing. 

Once you’ve completed those five steps, you’ll be good to go! However, if you obtained the rental property that you want to use prior to forming the LLC, there are additional steps:

• File an updated deed (one showing the LLC as the property owner) with your local parish or township
• Pay any applicable title transfer tax

Remember that transferring your property to the LLC can cause disruptions to your financing arrangement. For that reason, we recommend that you contact the mortgage company before making the transfer. You may need to complete additional financial paperwork for the property or negotiate new financing terms and rates. 

Last, but not least, inform all current tenants or renters about the ownership change in writing. Also, update any current and future leases and rental agreements to reflect the new property owner. 

Who should form a Louisiana LLC for their rental property?

Forming a Louisiana real estate LLC is a good idea for anyone who’s looking to rent out vacation or residential properties. Therefore, we recommend that most property owners create a Louisiana real estate LLC, regardless of their background or the number of rental units they own. 

If you decide to establish an LLC for rental properties in Louisiana, it’s best to form the LLC before acquiring the property. The main reason for this is that you can identify yourself as a commercial real estate buyer when shopping for a rental property. As a commercial buyer, you may have an easier time acquiring property. Additionally, as a commercial purchaser, you’ll likely be able to obtain a greater amount of financing and enjoy special financing terms.

The other main benefit of forming the LLC first is that you can buy real estate investments as the LLC. This means that the deed for the property will be in the LLC’s name from the beginning, and you won’t need to worry about changing the deed later on. 

If you buy the property first and then create the LLC, it’ll create extra work. For one, transferring the property from yourself (an individual) to your LLC (a corporate entity) could affect the existing financing for the property. Furthermore, you’ll have to transfer the property to the LLC and record it at the local land records office. In many states, this transfer may result in additional taxes. 

How We Can Help

If you are looking to create a property LLC so that you can maximize your rental income, know that we’re standing by to assist. We offer a wide variety of services and products for every part of the business journey. Whether you need to form your Louisiana rental property LLC, stay compliant with state law, or organize your business, we can help.