Creating a Rental Property LLC in Rhode Island

Sheltering your Rhode Island rental property within an LLC casts a lighthouse beam of legal security and tax benefits, guiding your venture safely through the Ocean State’s surging real estate seas.

Starts at $0 + Rhode Island state fees and only takes 5-10 minutes

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

Benefits of creating a rental property LLC in Rhode Island

Liability Protection

Perhaps the greatest advantage of an LLC is the limitations on liability it offers. Generally, an LLC and not the owner is liable for the debts and liabilities of a company. For example, a disgruntled tenant would likely need to look to the LLC, and not the owner, to resolve a dispute. There are exceptions to this rule, but such exceptions are typically related to things like illegal activity and fraud.

Pass-Through Taxation

An often overlooked aspect of an LLC is that it’s subject to pass-through taxation. For most LLCs, the rental income of the company passes directly to the owner for tax purposes. If you were to form a corporation, on the other hand, it would likely be taxed on the corporate level. The advantage of an LLC is that bypassing corporate taxes can help avoid double taxation issues. This could save you and your business money. 

Separation of business and personal property

A Rhode Island real estate LLC can be a good way to separate your business and personal assets. Mixing assets could expose them to unnecessary liability risk. It is also harder to gauge the success of your rental property when its assets are mixed with your personal assets.

Series LLCs for Rhode Island

Another big advantage of forming an LLC is the ability to use series LLCs. With a series LLC, you may be able to spin off subsidiaries without having to go through the typical formation process. This could allow you to keep multiple rental properties in different series LLCs. Using multiple series can add another layer of liability protection.

Rhode Island does not allow the formation of series LLCs.

What to know before creating a rental property LLC in Rhode Island

Forming an LLC is often a critical step when you purchase your first investment property. The simplicity of running an LLC can make it ideal for real estate investors. But don’t confuse being simple with being weak. An LLC can be a very effective tool for protecting your assets.

It’s usually better to form your LLC before you buy your first rental property. If you have existing investments, don’t worry. You can still add these rental properties to your LLC, but you may need to take some additional steps.

How to form an LLC for your Rhode Island rental property

Our LLC Formation Services allow you to easily form your Rhode Island rental property LLC. We designed these services to show you how to set up a real estate LLC in Rhode Island with a minimum of effort. Our formation process typically involves the following steps:

Step 1: Form Your LLC

  1. Name your Rhode Island LLC
  2. Appoint a Registered Agent
  3. Create an Operating Agreement
  4. File a Certificate of Formation
  5. Apply for an EIN

After your LLC has been formed, some additional steps may need to be taken if you already have rental properties.

Step 2: Transfer Ownership of the Property to the LLC

If you already own real estate assets, you will likely need to transfer the deed to the LLC. Typically, this is done by filing a new deed in the Registry of Deeds office. The deed will probably be filed in the same county as the property. You may need to pay a deed transfer tax when filing a new deed.

Step 3: Inform Lenders

If you took out a loan or mortgage to buy your property, you will likely need to inform the lender of the transfer. The lender may also require you to execute new paperwork for the property. The transfer could also affect the terms or rate of your loan.

Step 4: Inform Tenants

You will probably need to inform any existing tenants of the transfer as well. It may also be a good idea to amend the existing leases or have the tenants execute a new lease. If you do not have any tenants yet, then it would still be a good idea to make sure any lease or rental forms are updated.

Who should form a rental property LLC in Rhode Island?

An LLC is usually a great option for protecting your real estate investments and for property management companies. The ease and simplicity of forming an LLC, combined with its liability protection and flexibility, could make it ideal for managing your rental properties.

How We Can Help

Setting up an LLC for your rental properties can seem overwhelming. We get that. That’s why we created our easy-to-use Formation Services. Let us handle the formation stuff so you can focus on growing your business. Once you’ve got things going, we have a number of other helpful services as well. Not only can we help you write a great Business Plan for your company, but we can also help you protect your company with our Worry-Free Compliance Service.

Rhode Island LLC for Rental Property FAQs

  • A few of the many benefits include limited liability, simplified taxes, and the ability to keep separate your personal and business assets.

  • Our Formation Services allow you to choose almost any name you want for your company. There may be some restrictions, such as making sure the company has a variation of “limited liability company” in the name.

  • If your LLC is not doing business in your home state, then you probably do not need to register it. That said, it may be wise to check with your home state to be safe.

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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