Creating a Rental Property LLC in Utah

Carving your Utah rental property into an LLC sculpts a monument of legal protection and financial advantages, elevating your investment to majestic heights in the Beehive State’s scenic real estate market.

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Sometimes a good business idea can be as simple as renting out what you already own. If you own real estate in Utah, you have the potential to thrive financially by running a rental property business. So, what’s the best way to set up your rental property business? Well, that depends on your specific goals and needs. But an entrepreneur can enjoy several protections and benefits by putting their rental property in a limited liability company (LLC). 

If you haven’t started an LLC before and you want to start one now, it doesn’t have to be hard. Our Utah LLC Formation Service can help you through the process. Once you’ve started your rental property LLC in Utah, we can help you maintain and grow your LLC with our suite of business products and services

Benefits of creating LLCs for rental properties in Utah 

When finding out what to know before creating an LLC for a rental property in Utah, you probably wonder about the benefits they offer. Three big benefits of starting an LLC are the legal protections, the tax advantages, and the potential ease of running one. 

Liability Protection

Lawsuits and debt collection are always unwelcome occurrences. These words can be even more unpleasant if a business-related legal or financial issue hurts you in your personal life. With LLCs, members or owners are normally not personally responsible for the legal or financial problems of their LLCs. 

Pass-Through Taxation

While LLCs and corporations both offer personal liability protection, it’s often easier to pay taxes on your LLC than on a corporation. Many standard corporations are subject to double taxation because the corporation has to pay taxes on its income, and then the corporate shareholders have to pay takes on the distributions they receive from that income. On the other hand, LLCs typically feature “pass-through taxation,” meaning that the LLC owners pay income tax on their share of the LLC’s earnings but the LLC itself doesn’t pay income taxes.

Separation of business and personal property

LLCs are distinct from their owners. Your LLC can own property in its own name and take on obligations in its own name. Your personal assets are normally not mixed with your LLC’s dealings. This means that if your LLC runs into trouble, you usually don’t have to be concerned about those troubles affecting your personal assets. 

Series LLCs for real estate investors in Utah 

You might find great business success in renting out multiple properties at the same time. Does this mean that you have to start multiple LLCs to protect one rental property from the legal and financial woes of another? In Utah, you have the option of protecting multiple rental properties with a series LLC, which allows you to separate the assets your LLC owns into insulated groups. If one group of assets in a series LLC has legal or financial problems, creditors or complainants normally can’t collect or seek judgment against another group of assets in that LLC. A series LLC can help you compartmentalize your rental properties so that you can tend to a property that is having issues without having to worry about it affecting the properties that are doing well.  

What to Know Before Creating a Rental Property LLC in Utah

Before you jump headfirst into starting an LLC for your investment property, let us give you a summary of how LLCs work and the benefits you could have as an LLC owner. 

How to form an LLC for your Utah rental property

While it’s normally easier to form than a corporation, getting an LLC up and running still means some paperwork. We can help you get through this paperwork with our Utah LLC Formation Service.

Step 1: Choose LLC Name

When selecting a name for your LLC, be sure to choose one that meets state requirements. We can do a search for you to see if the business name you want is available. If it is, let us reserve the name while you get the filing paperwork together. 

Step 2: Select Registered Agent

Businesses in the state are required to appoint a registered agent. This person is responsible for receiving important documents on behalf of the LLC, such as state correspondence and legal notices. If you need a registered agent, we can help you find one.  

Step 3: File Certificate of Organization

To officially form your rental property LLC, you need to file a Certificate of Organization with the right state office and include the appropriate filing fee.

Step 4: Create an Operating Agreement

Your LLC’s Operating Agreement is one of your most important business documents. It governs how your LLC runs and provides instructions for anything from voting procedures to dissolve the company. If you’re not sure how to create an Operating Agreement, we offer templates that can serve as a guide. 

Step 5: Apply for Employment Identification Number (EIN)

The IRS assigns businesses a nine-digit EIN that is used to identify their enterprise. Having one is necessary for certain business matters, such as opening a business bank account, hiring employees, and getting financing. You can apply for an EIN yourself on the IRS’s website, or we can do it for you with our EIN service

Additional Steps

If you need to transfer a rental property you own to your LLC, you can do so in a written deed. Transfer of the property might require payment of a transfer fee. You then have the properly signed deed recorded in the county where the property is located.

If there is a loan or mortgage on the property, you need to inform your lender of the change in ownership so they can make necessary changes to the loan paperwork, including the loan terms and rates. You also need to let existing renters know about changes in ownership and amend their lease agreements where appropriate. 

Handling your obligations to renters can be a handful. Once you’re ready to start renting your property, you might want to enlist the help of property managers from reputable property management companies. 

Who should form a Utah LLC for their rental property?

In general, almost anyone can benefit from starting an LLC to collect rental income from vacation or residential properties. It is easier to start a Utah real estate LLC before you purchase the rental property. That way, you can purchase the rental property in the LLC’s name. A little extra work is required when you form your LLC after you purchase your investment property. We give you the general steps below.  

How We Can Help

Some of the best business people know when to ask for help with their ventures. Let us take some of the pressure off with our array of business support services. Our LLC Formation Services and Business Plan Template can help you get a quick start to your business with a solid vision. As your business changes, we can help you stay legally compliant with our Worry-Free Compliance Service

Utah LLC for Rental Property FAQs

  • Forming an LLC can help you separate your personal life from your business life. That way, you can be personally protected from most legal or financial issues in your business.

  • You have some leeway when choosing the name for your rental property LLC. In general, your LLC’s name must contain the phrases “limited liability company,” “limited company,” or their legally accepted abbreviations. Your LLC’s name has to be distinguishable from other names registered with the Division of Corporations.

  • If you conduct the business of your Utah LLC in your home state, you likely have to register it as a foreign entity there. We recommend reaching out to your home state authorities to verify whether you need to register.

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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