Massachusetts rental property LLCs

Create a Rental Property LLC in Massachusetts

There are many benefits of forming an LLC for rental properties in Massachusetts. Learn how to create an LLC and how we can help make it easier for you.

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As a Massachusetts landlord, one thing you always have to worry about is protecting your personal assets from lawsuits. One mistake that landlords make is owning all of their personal assets, including their rental properties, under their own name. The safest and smartest decision is to create a rental property LLC in Massachusetts that technically owns your rental property. By doing this, you receive both legal and financial benefits to protect your business.

The benefits of forming an LLC are immense for real estate investors for a fairly low cost. When you use our services to form your Massachusetts LLC, we can make the process quick and easy. And after formation, our other products and services can help make running your rental property business as smooth as possible.

How to form an LLC for your Massachusetts rental property

We can make setting up a limited liability company in Massachusetts simple and easy. The steps are:

Step 1: Name Your Massachusetts LLC  

When selecting a name for your LLC, be sure to choose one that meets state requirements. We can do a 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: Appoint a Registered Agent  

Businesses in the state 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 registered agent, we can help you find one.  

Step 3: File a Massachusetts Certificate of Organization  

To officially form your rental property LLC, you need to file a Certificate of Organization with the right state office and include the appropriate filing fee.

Step 4: Create an Operating Agreement  

Your LLC’s Operating Agreement is one of your most important business documents. It 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 templates that can serve as a guide. 

Step 5: Apply for an 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. You can apply for an EIN yourself on the IRS’s website, or we can do it for you with our EIN service

Transfer title of the property to the LLC

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 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. 

What to know before creating a rental property LLC in Massachusetts

There are some important benefits to forming an LLC for property owners in Massachusetts.

Benefits of creating LLCs for rental properties in Massachusetts

Establishing a rental property LLC in Massachusetts is simple and straightforward. Even though your properties will be officially owned by the LLC, you still have control and responsibility for them because you own the LLC. Creating an LLC provides both financial and legal benefits that don’t exist without a rental property LLC in Massachusetts.

Liability protection

Having a separate legal entity such as an LLC own your rental properties affords you legal protection against lawsuits. Without a rental property LLC in Massachusetts, your personal assets could become tied up in a lawsuit. For example, let’s say someone slips and falls on your rental property sidewalk and files a lawsuit against the landlord. If the property is solely in your name, then that plaintiff can attempt to get at all of your personal assets to pay for whatever judgment a jury awards.

But if the rental property is separately owned by a limited liability company, then the only thing the plaintiff can go after is the insurance policy and assets owned by that particular LLC. It means all of your personal assets are safe, like your home, vacation home, investment properties, or other assets.

Pass-through taxation

Pass-through taxation is a way to pass business income through the corporation, LLC, or other business entity. The income passes to the owner of the LLC who is taxed at their individual tax rate. Without a rental property LLC in Massachusetts, you might pay taxes twice on the rental income you receive — once at the business level and once on your individual taxes.

Separation of business and personal property

As mentioned above, there are benefits to having your business assets separate from your personal assets. When your assets are owned in one basket, this opens you up to all sorts of negative possibilities. Lawsuits could potentially take everything from you. Also, if you declare personal bankruptcy, all your personal assets, including your rental properties, might be subject to bankruptcy. 

Series LLCs

A series LLC is a special kind of limited liability company that allows the owners to establish different “series” under the LLC umbrella. Each series is treated as a separate company under the umbrella LLC and can own property and assets that are separate and from the other series. This protects each series from the liability that could potentially occur under another series. Unfortunately, at this point, Massachusetts doesn’t offer series LLCs.

Who should form a Massachusetts LLC for their rental property?

If you’re a first-time buyer or even if you already own several rental properties in Massachusetts, there’s a good chance you’ll want to form an LLC for your rental property. If you currently possess real estate in your own name, all it takes is a little extra time and effort to properly transfer the ownership rights onto the LLC. However, creating the LLC first and then purchasing your new rentals through it is the simplest approach.

How We Can Help

Owning and managing rental properties in Idaho comes with risks and rewards. Minimize your risks by creating an LLC. We have the resources, services, products, and support you need to create and run a successful rental property LLC in Massachusetts. From filing your formation documents with our LLC Formation Service to helping you maintain good standing with the state law through our Worry-Free Compliance Service — we’ve got you covered. 

Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

FAQs

  • What are the benefits of creating an LLC for your rental property?

    Once you create a rental property LLC in Massachusetts, it’s recognized by the state and by law as an entity that’s separate from yourself. Your rental property is now considered one asset owned by this separate company —  which provides certain financial benefits as well as liability protection for your personal assets.

  • How do you name the LLC for your rental property?

    You can pick any name that follows state law and is not already taken by another business.

  • If my home state is not Massachusetts, do I need to register the Massachusetts LLC as a foreign entity in my home state?

    No. If your company is properly organized and formed as a Massachusetts LLC, it only needs to be registered with the Secretary of State in Massachusetts. However, if your LLC operates in other states, then you must register the company in all states where you conduct business.

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