Start a Business in Oklahoma
Create a Rental Property LLC in Oklahoma
There are many benefits of forming an LLC for rental properties in Oklahoma. Learn how to create an LLC and how we can help make it easier for you.
Steps to Create an Oklahoma Rental Property LLC
Buying real estate with the aim of renting it out for additional income is an excellent idea, not only as a small business start-up but also as a long-term investment in your family’s financial future. However, to maximize the benefits of this new opportunity it needs to be done correctly from the start. In this guide, we show you how to establish a foundation for your enterprise by creating a rental property LLC in Oklahoma.
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 Oklahoma LLC, we can make the process quick and easy with our Oklahoma LLC Formation Service. 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 Oklahoma rental property
When you are ready to form a rental property LLC in Oklahoma, you can get that done easily using our LLC Formation Services. Here are the steps:
Step 1: Form Your LLC
- Choose your LLC’s name
- Select a registered agent
- File Articles of Organization
- Create an operating agreement
- Apply for an Employment Identification Number (EIN)
After you have completed the above, you’ll have an LLC that’s ready to own property and capture rental income.
Step 2: Transfer Property into Your LLC
If you already own the real property prior to forming the LLC, then you need to transfer the title on the local land records and adjust the financing with your lending institution. Together with these actions, we recommend you inform any existing tenants that the landlord is now the LLC, not you.
Step 3: Update Lease and Rental Agreements
To support this change make sure you amend any leases to reflect the right property owner. The adjustment of your relationship with your tenants is extremely important to support any limited liability protection from the LLC.
What to know before creating a rental property LLC in Oklahoma
There are three core reasons why LLCs are the most popular business form, especially for managing rental properties.
Liability Protection
First, an LLC protects its owners (i.e., members) from liability stemming from LLC activity. 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.
Pass-Through Taxation
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 federal or state corporate tax rate.
Separation of Personal and Business Property
Finally, an LLC owns its own property, thereby keeping members’ personal assets separate and distinct from LLC operations. In rental property ventures, this separation is extremely important given the long-term relationship between the LLC, the property, and any tenants.
Series LLCs
In addition to these benefits, Oklahoma permits “series LLCs” which are ideal for owning rental properties. A series LLC consists of a master LLC with one or more subsidiary LLCs (i.e., series LLCs). In a series LLC, the master LLC owns each series LLC, and each series LLC owns a single rental property. This structure has two significant benefits. The first is making it easier for people to invest in your rental properties. Investors only need to invest in the master LLC to gain an interest in the business venture. Second, each rental property is isolated in its own LLC. Therefore, any negative event is isolated from all other series LLCs.
Who should form an Oklahoma LLC for their rental property?
The most common mistake in starting a small business is failing to clearly separate your personal property from the business’s property. Given the long-term nature of owning real property, together with the long-term relationship you may have with tenants — it’s very important to make this distinction between personal and business activity. A rental property LLC in Oklahoma provides this important legal partition. Owning rental property exposes you to ongoing risk in a way that selling widgets from a storefront does not. Therefore, placing your rental property into an LLC is a smart business practice.
Real estate transactions are complex and involve many parties and several legal documents. Therefore, we suggest you form your rental property LLC prior to buying any real estate. There are two reasons underlying our recommendation. First, if you need financing to purchase the property, it’s the buyer’s identity that will drive the availability, amount, rate, and term of any loan. Second, the deed to the property will ultimately need to be in the buyer’s name and that is best accomplished at the time of purchase. Putting the property in the business’s name from the start can get you better rates for your loans, and keep you from having to transfer the title later.
If you already have real estate investment property and want to transfer it to the LLC, or if you prefer to buy the real property in your name now and transfer it later, then you need to take a couple of extra steps. First, make sure that any transfer won’t affect the financing on the property. Check with your lender to get the transfer approved and then also to make any changes to the loan documents. After that step, you can transfer the deed from your name to the LLC on the local land records. Both of these steps are critical to placing the rental property into the LLC. As a last consideration, ask your tax professional if transferring the property will create a taxable event.
How We Can Help
We have a full suite of services to help you in this new adventure. We offer Formation Services, a Start Your LLC guide, a template to Write Your Business Plan, our Worry-free Compliance Services for legal compliance, and much more. Put simply, we have you covered all the way to opening up the doors to your new rental property LLC in Oklahoma.
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?
An LLC protects your personal assets from liability and treats the rental income as pass-through income on your personal income tax return. Further, you can more easily manage a portfolio of rental property.
- How do you name the LLC for your rental property?
Often the street address of the actual property is used for the LLC name (e.g., 123 Main Street USA, LLC), but you can choose any name as long as it adheres to state law and isn’t already taken.
- If my home state is not Oklahoma, do I need to register the Oklahoma LLC as a foreign entity in my home state?
LLCs usually need to register to do business in another state. More than likely, owning rental property is considered doing business. Check your home state’s Secretary of State website for further information.
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