Creating a Rental Property LLC in New York

Shielding your New York rental property with an LLC sets the stage for your investment to take a bite out of the Big Apple, combining legal protection with financial savvy in the city that never sleeps.

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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 New York today. And after formation, our other products and services can help make running your rental property business as smooth as possible.

Benefits of creating LLCs for rental properties in New York 

Liability protection

Many real estate investors set up LLCs to own their investment properties and shield themselves from liability. Since the LLC is its own entity, LLC owners (also known as members) aren’t liable for the debts or legal obligations of the LLC. If, for example, a creditor went after the LLC for an unpaid debt, the member’s personal assets are protected. Only the amount they’ve invested into the LLC can be used to satisfy the debt. 

Pass-Through Taxation

For tax purposes, the IRS doesn’t view LLCs as separate legal entities. Instead, income passes through to the LLC owners, who report that income on their personal tax returns. 

Separation of business and personal property

When you form a New York real estate LLC, you’re creating a way to keep your business and personal assets separate. This protects your assets from the LLC’s creditors or lawsuits against the company. Creating an LLC also allows you to put in just enough money to fund the LLC but still protect everything else you own. 

Series LLCs for real estate investors in New York

A series LLC is something investors use when they have multiple investment properties. With this type of LLC structure, you create “series” within the LLC, and each series can have its own assets, members, debts, etc. This limits liability to each series. 

While New York don’t allow formation of series LLCs, it’s good to know what they are in case you own property in a state that recognizes this type of LLC structure. 

How to form an LLC for your New York rental property

There are six steps to creating an LLC in New York. 

Step 1: Choose a Name

In New York, there are certain name requirements for businesses. With our Name Check and Reservation Services, we can see if the name you want is available and reserve it while you take care of other things, like completing paperwork or writing a business plan.

Step 2: Appoint a Registered Agent

Every New York business must have a registered agent. This person or entity is responsible for receiving important documents—  like correspondence from the state or legal papers —  on the LLC’s behalf. We can help you out if you need a New York Registered Agent

Step 3: File New York Articles of Organization

When you’re ready to officially form your LLC, you need to file Articles of Organization (along with a filing fee) with the Department of State.

Step 4: Create an Operating Agreement

An Operating Agreement may be the most important document for an LLC. This is the rulebook for how the LLC operates. Everything from tax treatment to voting to dissolving the business is covered in the Operating Agreement. To make writing one easier, we have Operating Agreement templates available to get you started. 

Step 5: Apply for an Employment Identification Number (EIN)

An EIN is necessary for an LLC to do things like open a bank account, get financing, and hire employees. This unique nine-digit number is how the IRS identifies your LLC. You can either apply for the EIN yourself on the IRS’s website or let us apply for you with our EIN Service

Step 6: Meet Publication Requirement

The last step to officially creating your LLC is to publish a copy of the LLC’s Articles of Organization or a notice of the LLC’s formation within 120 days of the LLC’s effective date. Notices must be published once per week for six successive weeks in two different newspapers. 

For more information about New York’s publication requirements, check out our New York Publication Service

Other Possible Steps to Consider:

Transfer Title of the Property to LLC

As mentioned earlier, if you purchase investment property prior to forming an LLC, you have to change ownership to the LLC. This requires filing a new deed with the appropriate local office. The property transfer may also be subject to applicable state or city transfer tax. 

Notify Lender

If the rental property is subject to a mortgage, you should notify the lender. A change in ownership may impact your current rates and terms. 

Update Lease or Rental Agreement

Any lease or rental agreement should reflect the LLC’s name as the current owner. If you have renters or tenants in place, notify them of the change as well. 

Who should form a New York LLC for their rental property?

Forming a rental property LLC in New York is advantageous for anyone who wants to start or continue renting vacation or residential properties. Whether you’re just getting started or already own some investment properties, there are significant benefits to having an LLC. 

If you don’t currently own any rental properties, it’s easier to form an LLC before you purchase any. The reason for this is that if you buy the property first, then the title is in your personal name. This means you’ll have to file paperwork to put the property in the name of the LLC. Having the LLC first avoids doing this extra work. 

How We Can Help

Starting an LLC for rental property in New York might feel overwhelming, but we can make forming one easy! Not only do we have the products and support to get you started, but with our Worry-Free Compliance Service, we’ll keep your business in good standing as it continues to grow.  

New York LLC for Rental Property FAQs

  • A rental property LLC in New York offers the following benefits:

    • Liability protection
    • Tax advantages
    • Flexible management style
    • Low start-up costs
    • Legitimacy and credibility for your business
  • While it’s important for the LLC name to reflect your type of business, it must also meet New York’s requirements. The name needs to include certain words or abbreviations, and no other business in New York can have the name you want.

  • No. You only need to register your New York real estate LLC in the state where it conducts business or owns property.

Disclaimer: The content on this page is for information 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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Written by Team ZenBusiness

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