North Carolina rental property LLCs

Create a Rental Property LLC in North Carolina

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

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For investment property owners, creating a limited liability company (LLC) is a great way to protect your rental properties and your future as a real estate investor. Forming a rental property LLC in North Carolina can be done in just a few simple steps, and we can help!

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 North Carolina 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 North Carolina rental property

LLCs offer so many benefits and are often the preferred choice for real estate investors. So how do you form a North Carolina real estate LLC? Let us do it! Here are the eight simple steps to creating an LLC for rental property. 

Step 1: Choose Your LLC’s Name

Select a name that reflects your business. Be sure to check that no other business has the name and that it meets North Carolina’s requirements for LLC names. We can run a business name search for you and even reserve the name while you set up your LLC. 

Step 2: Select a Registered Agent

North Carolina requires LLCs to have a registered agent who is available to accept important documents on behalf of the LLC. With our Registered Agent Service, you can get a North Carolina registered agent online today. 

Step 3: File Articles of Organization

In North Carolina, you must file Articles of Organization with the Secretary of State’s Office to officially create an LLC. You can go online and do this, or we can file the Articles for you with our LLC Formation Service.

Step 4: Create an Operating Agreement

An LLC Operating Agreement provides the framework for your business. It sets the rules for voting, membership, tax treatment, dissolution, and many other business matters. Check out our Operating Agreement Templates that you can customize to meet your needs. 

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

This nine-digit number is a way for the federal government to identify your business. Not only do you need an EIN for tax purposes, but it’s also necessary to open a bank account, hire employees, and apply for a business loan. 

With our EIN Service, we can apply for you, or you can do it yourself on the IRS’s website.

Step 6: Transfer Title 

As we mentioned earlier, if you purchase real estate prior to forming an LLC, eventually you’ll have to re-title the property in the LLC’s name. There’s some extra paperwork involved, which is why it’s better to create the LLC before buying the rental property if possible.

What to know before creating a rental property LLC in North Carolina

Before diving right into how to set up a real estate LLC in North Carolina, it’s important to understand the benefits of an LLC. This type of business structure might not work for all real estate investors. We want you to choose an entity type that’s right for you and your goals.

Benefits of creating LLCs for rental properties in North Carolina

Liability Protection

LLCs limit your personal liability because they’re their own separate, legal entity. An LLC provides a safety net around your personal assets and protects them from debts or lawsuits of the LLC. 

For example, if a tenant is injured on your property, they may file a lawsuit to financially recover damages. When the LLC owns the property, only the LLC can be sued, not you individually. This means that only the LLC’s assets can be used to satisfy the legal judgment. Your personal assets, like bank accounts and other real estate owned by you, are protected. 

Similarly, if a creditor goes after the LLC for an unpaid debt, your personal assets are untouchable. Only the LLC’s assets can be collected to satisfy the financial obligation. 

Pass-Through Taxation

LLCs offer substantial tax benefits, most notably, pass-through taxation. When you form an LLC for rental property in North Carolina, the LLC is not taxed directly. Rather, you, as the owner, report the LLC’s profits and losses on your personal tax return. The rental income is subject to tax only once, meaning more money in your pocket. 

Separation of Business and Personal Property

By creating an LLC, you can keep your business and personal assets separate. If you commingle the two, it’s possible for creditors or legal claimants to go after your personal property. 

Since an LLC is a separate legal entity, it can have its own bank account, credit card, insurance, etc. It’s important for the LLC to have these, so you can protect what you own as an individual. Keeping everything separate also makes it easier for accounting and tax purposes.

Series LLCs

A series LLC is a type of business structure that allows you to create mini-LLCs within your main LLC. Think of it as a corporation with subsidiaries. Each series has its own membership interests, assets, and records, and liability is limited to each series. 

For real estate investors with multiple rental properties, a series LLC can offer additional protections. Forming a series LLC is much cheaper and quicker than setting up a new LLC for each rental property. 

North Carolina doesn’t recognize series LLCs, but you may end up owning property in a state that does. 

Who should form a North Carolina LLC for their rental property?

You don’t have to be a real estate tycoon to form an LLC. Forming a North Carolina real estate LLC is a good idea for anyone who wants to rent properties for vacation or residential purposes. 

Keep in mind, it’s much easier to form your LLC first and then buy rental properties. This avoids having to retitle the property in the name of the LLC and possibly pay the real estate transfer tax. 

Lastly, record the new deed with the Register of Deeds in the county where the property is located. North Carolina also imposes an excise tax on the transfer of real property. 

Inform your lender

If the property is subject to a mortgage or loan, make sure you notify the lender that the property is changing ownership. This may impact your loan rates, but that’s something you can discuss with the lender. 

Update rental or lease agreements

Be sure to update your rental or lease agreements to reflect the change in ownership. If you have tenants or renters currently in place, you also want to inform them that the property is now owned by an LLC. 

How We Can Help

Starting your own rental property LLC in North Carolina is simpler than you may think. When you use our LLC formation service, we make the process even easier. Then, take advantage of our Worry-Free Compliance Service, where we keep your important business document on file, remind you of upcoming reporting deadlines, and help you maintain your good standing with the state. 

We have the services you need to start, run, and grow your business. 

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?

    LLCs offer a range of benefits, including tax advantages, liability protection, and flexibility in terms of management style. They’re also easy to form and give your business credibility.

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

    While you want to choose a business name that suits you, it’s also essential for the name to meet the legal requirements of North Carolina. There are certain words/lettering that the name must include, and it can’t currently be in use by another business.

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

    No. You only need to register your LLC in the state where it’s doing business or owns property.

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