There are many benefits of forming an LLC for rental properties in Michigan. Learn how to create an LLC and how we can help make it easier for you.
Whether you have a vacation rental, residential home, or apartment building, you might not think of yourself as a business when you’re considering renting a property out to someone else. But the truth is your tenants can sue you if things go wrong, just like any business. It’s a good idea to take advantage of legal protections for yourself, like forming a limited liability company (LLC).
Setting up an LLC is advantageous for many reasons. Not only are they easy to create, but the liability protection, tax benefits, and flexibility in management style make them a great option for real estate investors. We can help you form a rental property LLC in Michigan today. And after formation, our other products and services can help make running your rental property business as smooth as possible.
Here are the steps to form an LLC in Michigan.
When selecting a name for your LLC, be sure to choose one that meets Idaho’s 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.
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Businesses in Michigan 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 Michigan registered agent, we can help you find one.
To officially form your rental property LLC in Michigan, you need to file Articles of Organization with the Secretary of State’s office and include the appropriate filing fee.
Your LLC’s 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 templates that can serve as a guide.
The IRS assigns businesses a nine-digit EIN that is used to identify their enterprise. Having one is necessary for certain business matters, such as opening a business bank account, hiring employees, and getting financing.
After you’ve created the legal LLC entity, your next step is to transfer title in the property to the LLC. This is because the LLC will be the legal owner of the real estate. Thus, if you purchased the property in your individual name, you must transfer ownership to the LLC entity. You’ll also have to record the transfer deed with the appropriate county where the real estate is located.
If there’s an existing mortgage on the property, you’ll want to discuss it with your lender to verify whether any terms or rates on the loan will need to be adjusted. Additionally, if applicable, make sure to also pay any requisite transfer tax. Once the transfer is complete, the LLC will be the official owner of the rental property. However, don’t forget to notify your tenants and update any lease agreements to reflect the ownership change.
When it comes to investment property, setting up a legal business entity can be a great benefit. Doing so isn’t necessarily required. However, failure to go through these legal channels can result in potential legal liability in the future. Thus, before creating a rental property LLC in Michigan, there are a few key things you should know.
Again, you don’t have to set up an LLC for a rental property in Michigan. Doing so may not be for everyone, and it’s true that many people choose not to. However, there are certainly a number of benefits associated with creating a formal rental property LLC in Michigan.
Some of the most sought-after benefits of setting up a Michigan real estate LLC include:
In certain states, investment property owners may also benefit from the ability to form what’s referred to as a series LLC, which allows you to form a single umbrella LLC entity with multiple separate “series” beneath. This can be useful for real estate investors who want to benefit from personal liability protection for multiple investment properties without the hassle and expense of setting up a separate legal entity for each one.
Series LLCs are only allowed in certain states and aren’t currently permitted under Michigan law. However, this may be something to consider for those who own property in states that do permit the formation of series LLCs.
For many, one of the primary reasons not to form an LLC is to avoid spending the time and money required to set up a legal business entity. However, spending the time and money at the outset can greatly reduce your risk of legal and financial liability later on down the line.
Forming a Michigan LLC is a good idea for almost anyone who is currently leasing a rental property or looking to do so in the future. Even if you’re already renting out your property, you can still create an LLC and transfer ownership from yourself to the entity to begin reaping the benefits moving forward.
If you’re a Michigan investment property owner looking for a way to protect yourself and your property, forming a rental property LLC in Michigan is a great place to start. Though it may seem like a lot of work, with our assistance, it’ll feel like a breeze. And the benefits and protections you’ll receive as a result will be well worth it.
Not sure where to start? We can walk you through the process and help you write your business plan or set up your LLC to protect your personal assets today.
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.
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There are a number of valuable benefits associated with creating an LLC for a rental property in Michigan. Some of these key benefits include pass-through taxation and personal liability protection.
You can select nearly any name for your LLC that isn’t already in use by another entity in the state. However, many investment property owners elect to name the LLC after the property address or some variation thereof.
If you’ve formed a Michigan LLC for your Michigan properties, then you’re doing business in Michigan regardless of where you live. Most states require businesses from another state that operate within their borders to register as a foreign entity. Always check with your home state to be sure you’re complying with their requirements.
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