Creating a Rental Property LLC in Washington

Anchoring your Washington rental property with an LLC rains down a shower of legal protection and tax advantages, cultivating a lush environment for your investment to grow in the Evergreen State’s dynamic real estate climate.

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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 Washington 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 Washington

Liability Protection

Owning your rental homes as an LLC gives you legal protection against lawsuits since the LLC is considered a separate entity. Your personal assets might be tied up in a lawsuit if you don’t have a Washington rental property LLC. For example, let’s say someone is injured on your rental property and they claim the landlord (you) is responsible. If all of your personal assets, including your rental properties, are owned by you individually and in your own name, then those assets are open to judgment.

Pass-Through Taxation

Pass-through taxation is the process of passing business earnings through a company or LLC or some other business entity. The money goes to the owner of the LLC, who then pays taxes at the personal rate. You may pay tax twice on rental income if you don’t have a Washington rental property LLC: once at the company level and again at the individual level.

Series LLCs for real estate investors in Washington

A series LLC allows for the owner to create one LLC holding company as a parent company and then as many other series businesses as part of an LLC stemming from the parent company. Each series is treated as a separate company under the series LLC, able to own property and assets separate from the other series.

Washington state does not have a legal entity called a series LLC, however, several other states do allow for the creation of a series LLC.

What to know before creating a rental property LLC in Washington

Establishing a rental property LLC in Washington is straightforward. Even though your properties will be officially owned by the LLC, you will still have control and responsibility for them because you will also be the owner of the LLC. Creating an LLC provides both financial and legal benefits. These benefits don’t exist without a rental property LLC in Washington.

How to form an LLC for your Washington rental property

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

To transfer real estate you already own to your LLC, you normally need to sign and file a new deed granting the property to the LLC and pay any relevant taxes. If you have a mortgage on the real estate, you will need to notify your lender about the new owner so it can update the mortgage and change the terms and rates as necessary. You might also need to change the language in your leases and inform your existing tenants about the new ownership.

Who should form a Washington LLC for their rental property?

There’s a high possibility that you’ll want to form an LLC for your rental property if you’re a first-time buyer, or even if you own numerous rental properties in Washington. If you already have real estate in your own name, all it takes is a little additional time and effort to transfer the property rights to the LLC. However, if you’re planning on starting a rental real estate business in Washington, it’s easier to first create the rental property LLC and then purchase your properties through the LLC. This will save you money and time in the long run.

How We Can Help

The information and tools we have are just a few clicks away to help you feel more secure starting or running your rental property LLC in Washington. The formation and compliance tools we offer can make the process easier.

Washington LLC for Rental Property FAQs

  • The state recognizes your rental property LLC in Washington as a separate entity from yourself. This offers certain tax advantages and protection for your personal assets.

  • You’re allowed to name your rental property LLC in Washington anything you wish. The only concern you’ll have is to first make sure whatever name you chose isn’t already in use by some other business in Washington state.

  • If your firm is properly established and incorporated as a Washington LLC, it has to be registered in Washington. However, if your LLC does business in other states, you likely must register it there.

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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