Unlock the potential of Ohio’s Rental Property LLCs to streamline property management and protect your investments. Learn about the benefits of creating an LLC for your rental properties in Ohio and how it can boost your real estate portfolio’s performance.
Investing in rental property can be a very sound decision, both as a source of additional income and to protect your family’s financial future. However, correctly structuring the ownership of investment property at the outset is critically important. In this guide, we show you why a rental property limited liability company (LLC) is a good idea and how to set up a real estate LLC in Ohio.
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 Ohio 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.
When you are ready to form your limited liability company for your rental properties, let us help you with our Ohio LLC Formation Services. We will help you with the following steps:
After completing these steps, your real estate LLC in Ohio is ready to go. Remember, in the event that you bought the property prior to forming an LLC you will need to:
Finally, check with your lender to make sure that a transfer of the property does not affect the loan. If it doesn’t, remind the lender to amend the loan documents to reflect the new owner (i.e., the LLC). As a side note, since the identity of the borrower has changed from you to the LLC, the terms of the loan may be adjusted by the lender (e.g., change of rate, term, etc.).
As a last, but extremely important point, notify any tenants of the change of ownership of the rental house and direct them to communicate only with the LLC as the property manager. You should also memorialize these changes in the lease through an amendment.
Before we get into the details of real estate LLCs, let’s discuss the benefits of LLCs in general.
The most significant benefit of an LLC is the limited liability it extends to its owners (i.e., “members”) and their personal property. LLCs limit personal liability because they’re separate legal entities. An LLC provides a safety net around your personal assets and protects them from debts or lawsuits of the LLC.
In addition, for tax purposes, LLCs pass through all income to their members. That means that LLC income is taxed at the member’s personal tax rate instead of the state corporate tax rate.
Finally, an LLC owns property separately from its members. In rental property ventures, this separation is extremely important given the long-term relationship between the LLC, the property, and any tenants.
In addition to the above benefits, Ohio also recognizes series LLCs. A series LLC is simply a grouping of separate properties (i.e., the series) under the umbrella of a master LLC. The benefits of this real estate LLC structure are twofold.
First off, the structure allows for easy investment in the rental property venture. An individual needs to invest only in the master LLC to have a piece of everything in the series. Secondly, each rental property is isolated from all others. Therefore, if there is a negative event with one property (e.g., an injury lawsuit) the liability is isolated from the other properties in the series LLCs.
Anyone who plans to own rental properties would be wise to consider setting up a limited liability company as the owner and property manager. Such a consideration is even more important if you plan to own more than one rental property or grow the business.
Once you decide to purchase rental property, forming your rental property LLC in Ohio prior to purchasing the property is the smart choice. Moving your property into an LLC after you own it is more complicated for a couple of reasons. Buyers are central to real estate transactions. The buyer’s identity will dictate the availability of financing, its amount, rate, and terms. Further, the deed must be in the buyer’s name, and almost always, it must be the same as the person obtaining financing.
In the alternative, if you already own a rental property or elect to purchase it in your own name and transfer it later, you need to take the following steps to transfer it. First, check with your lender to make sure that transferring the property to the LLC will not violate the terms of any loan attached to the property. Second, and after you get clearance from the lender, transfer ownership on the local land records by way of a deed. Both of these steps are important — the former to protect financing and the latter to take advantage of the LLC’s liability protection. As the last step, check with your tax professional to make sure the transfer does not trigger a tax event.
Starting your own rental property LLC in Ohio 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 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.
Ohio LLC for Rental Property FAQs
Most importantly, with an LLC you can protect your personal assets from liability. However, you can also treat the rental income as pass-through income on your personal income tax return and more easily manage a portfolio of rental property.
Many people name their rental property LLC with the street of the actual property (e.g., 630 Speer Boulevard, LLC). However, you can choose any name that complies with state law and isn’t already taken.
If your Ohio LLC is conducting business in any state other than Ohio, you will likely need to register your business in that state. However, if you live in another state but only operate your LLC in Ohio, you’ll only need to register in Ohio.
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