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Last updated July 29, 2021

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Should I form an LLC for each rental property?

This question really comes down to cost vs. benefit analysis.

I usually form a new LLC for every property I purchase.

Remember: you need to setup your LLC before you purchase your property. Watch this video to make sure you don’t make this mistake.

Not only does this strategy of each property owned by a different LLC protect my personal assets, but it also separates each property from the others.

Story time…

Let’s say that I have 3 houses. The first house (house #1) is owned by LLC #1, the second house is owned by LLC #2, and the third house is owned by LLC #3.

If a tenant slips and falls at house #1 one and sues LLC #1, my properties owned by LLC #2 and LLC #3 are protected from that lawsuit.

Aside from the extra liability protection I also like to keep my books in my finances extremely organized.

For each LLC that I form I also have a new EIN and a separate bank account.

That means all of my income and expenses for each property sits within its own bank account and therefore is very easy to see which property is more profitable that the others, pay bills, and manage finances.

If on the other hand, I had one LLC that owned all three of the properties I would have to rely on my bookkeeper and/or my property manager to differentiate which property brought in income and which expenses were attached to each property. This makes both keeping and finances a little bit more cumbersome.

Need help with your LLC? Have a professional LLC service file for you:
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Selling the LLC instead of the property (avoiding transfer tax)

Another benefit the having each house owned by a different LLC is that if you decide to sell the property in the future you have an alternative for an exit strategy.
Instead of selling the real property from your LLC to the new buyer, you can just sell the entire LLC and therefore you may be able to avoid transfer tax.

You’ll need to speak with a real estate attorney and/or accountant in your area to double check on this strategy. I strongly recommend you hire a competent real estate attorney with experience assisting clients in the sale of businesses.

You want to make sure the sales goes through correctly and your are legally avoiding transfer tax. I see a lot of amateur real estate Investors trying to sell LLC themselves and they totally screw it up!

How many LLCs for more than 10 properties?

The above strategy makes sense if you have less than 10 properties. But if you have more than 10 properties setting up 10, 15, 20, 25 different LLCs and having them all own different bank accounts could, at some point, become a little bit messy from an organizational standpoint.

So what should you consider if you own more than 10 real estate investments? A common strategy is to “group them”… putting 2-3 properties in a different LLC.

Consider LLC fees & annual registration fees for multiple LLCs

Again, for the best asset protection it’s best to put every single property in its own LLC, without those LLCs being engaged in any other businesses.

However if your state has high filing fees and high annual renewal fees then setting up 15, 20, 25 different LLCs could become quite costly on an annual basis.

See the tables below for state filing fees + annual registration fees for all states. You’ll need to weigh the cost versus the benefits to see if it’s a viable option for you.

State filing fees for LLCs

(note: it’s best to form your LLC in the state where your investment property is located. For more info, check out this video)

State LLCLLC Filing FeeLLC Annual/Biennial Fee
Alabama LLC$200$100 minimum (every year)
Alaska LLC$250$100 (every 2 years)
Arizona LLC$50$0 (no fee and no information report)
Arkansas LLC$45$150 (every year)
California LLC$70$800 (every year) + $20 (every 2 years)
Colorado LLC$50$10 (every year)
Connecticut LLC$120$80 (every year)
Delaware LLC$90$300 (every year)
Florida LLC$125$138.75 (every year)
Georgia LLC$100$50 (every year)
Hawaii LLC$50$15 (every year)
Idaho LLC$100$0 (however, an information report must be filed every year)
Illinois LLC$150$75 (every year)
Indiana LLC$95$30 (every 2 years)
Iowa LLC$50$45 (every 2 years)
Kansas LLC$160$50 (every year)
Kentucky LLC$40 (sorry, I said $90 in the video)$15 (every year)
Louisiana LLC$100$35 (every year)
Maine LLC$175$85 (every year)
Maryland LLC$100$300 (every year)
Massachusetts LLC$500$500 (every year)
Michigan LLC$50$25 (every year)
Minnesota LLC$155$0 (however, an information report must be filed every year)
Mississippi LLC$50$0 (however, an information report must be filed every year)
Missouri LLC$50$0 (no fee and no information report)
Montana LLC$70$20 (every year)
Nebraska LLC$105$10 (every 2 years)
Nevada LLC$425$350 (every year)
New Hampshire LLC$100$100 (every year)
New Jersey LLC$125$75 (every year)
New Mexico LLC$50$0 (no fee and no information report)
New York LLC$200$9 (every 2 years)
North Carolina LLC$125$200 (every year)
North Dakota LLC$135$50 (every year)
Ohio LLC$99$0 (no fee and no information report)
Oklahoma LLC$100$25 (every year)
Oregon LLC$100$100 (every year)
Pennsylvania LLC$125$70 (every 10 years)
Rhode Island LLC$150$50 (every year)
South Carolina LLC$110$0 (no fee and no information report, unless LLC is taxed as an S-Corp )
South Dakota LLC$150$50 (every year)
Tennessee LLC$300$300 (every year)
Texas LLC$300$0 for most LLCs (however a No Tax Due Report and Public Information Report must be filed every year)
Utah LLC$70$20 (every year)
Vermont LLC$125$35 (every year)
Virginia LLC$100$50 (every year)
Washington LLC$200$60 (every year)
Washington DC LLC$99$300 (every 2 years)
West Virginia LLC$100$25 (every year)
Wisconsin LLC$130$25 (every year)
Wyoming LLC$100$60 minimum (every year)

Annual renewal fees for LLCs

State LLCLLC Filing FeeLLC Annual FeeDuePayable To & Form Name
Alabama LLC$200$100 minimum2.5 months after formationAL Department of Revenue, Initial Business Privilege Tax Return
Alaska LLC$250$100Biennial, January 2AK Department of CCED, Biennial Report
Arizona LLC$50$0No annual fee + no report dueN/A, N/A
Arkansas LLC$45$150Annual, May 1AR Secretary of State, Franchise Tax Report
California LLC$70$800 + $20VariousCA Franchise Tax Board, Annual LLC Franchise Tax + Stmt. of Information
Colorado LLC$50$105 month window surrounding
anniversary month
CO Secretary of State, Periodic Report
Connecticut LLC$120$80Annual, March 31CT Secretary of State, Annual Report
Delaware LLC$90$300Annual, June 1DE Dept. of State, Annual Franchise Tax
Florida LLC$125$138.75Annual, May 1FL Department of State, Annual Report
Georgia LLC$100$50Annual, April 1GA Secretary of State, Annual Registration Fee
Hawaii LLC$50$15During quarter of anniversary dateHI Business Registration Division, Annual Report
Idaho LLC$100$0 (must file an information report, no fee though)Annual, anniversary monthID Secretary of State, Annual Report
Illinois LLC$150$75Annual, anniversary monthIL Secretary of State, Annual Report
Indiana LLC$95$30Biennial, anniversary monthIN Secretary of State, Business Entity Report
Iowa LLC$50$45Biennial, April 1 of odd yearsIA Secretary of State, Biennial Report
Kansas LLC$160$50Annual, April 15KS Secretary of State, Annual Report
Kentucky LLC$40$15Annual, June 30KY Secretary of State, Annual Report
Louisiana LLC$100$35Annual, anniversary monthLA Secretary of State, Annual Report
Maine LLC$175$85Annual, June 1ME Secretary of State, Annual Report
Maryland LLC$100$300Annual, April 15MD State Dept. of Assessments, Personal Property Tax
Massachusetts LLC$500$500Annual, anniversary monthMA Secretary of the Commonwealth, Annual Report
Michigan LLC$50$25Annual, February 15MI Dept. of LARA, Annual Report
Minnesota LLC$155$0 (must file an information report, no fee though)Annual, December 31MN Secretary of State, Annual Report
Mississippi LLC$50$0 (must file an information report, no fee though)Annual, April 15MS Secretary of State, Annual Report
Missouri LLC$50$0No annual fee + no report dueN/A, N/A
Montana LLC$70$20Annual, April 15MT Secretary of State, Annual Report
Nebraska LLC$105$10Biennial, April 1 of odd yearsNE Secretary of State, Biennial Report
Nevada LLC$425$350Annually, anniversary monthNV Secretary of State, Annual List of Members + Business License
New Hampshire LLC$100$100Annual, April 1NH Secretary of State, Annual Report
New Jersey LLC$125$75Annual, anniversary monthNJ Department of Treasury, Annual Report
New Mexico LLC$50$0No annual fee + no report dueN/A, N/A
New York LLC$200$9Biennial, anniversary monthNY Department of State, Biennial Statement
North Carolina LLC$125$200Annual, April 15NC Secretary of State, Annual Report
North Dakota LLC$135$50Annual, November 15ND Secretary of State, Annual Report
Ohio LLC$99$0No annual fee + no report dueN/A, N/A
Oklahoma LLC$100$25Annual, anniversary monthOK Secretary of State, Annual Certificate
Oregon LLC$100$100Annual, anniversary monthOR Secretary of State, Annual Report
Pennsylvania LLC$125$70Every 10 yearsPA Department of State, Decennial Report
Rhode Island LLC$150$50Annual, September 1 - November 1RI Secretary of State, Annual Report
South Carolina LLC$110$0No report due unless LLC files taxes as an S-CorpN/A, N/A
South Dakota LLC$150$50Annual, anniversary monthSD Secretary of State, Annual Report
Tennessee LLC$300$300 minimumAnnual, April 1TN Secretary of State, Annual Report
Texas LLC$300$0 for most LLCs (however a No Tax Due Report and Public Information Report must be filed every year)Annual, May 15TX Comptroller, Public Information Report + Franchise Tax
Utah LLC$70$20Annual, anniversary monthUT Department of Commerce, Annual Report
Vermont LLC$125$35Annual, March 15VT Secretary of State, Annual Report
Virginia LLC$100$50Annual, anniversary monthVA Corporation Commission, Annual Registration Fee
Washington LLC$200$60Annual, anniversary monthWA Secretary of State, Annual Report
Washington DC LLC$99$300Biennial, April 1DCRA, Biennial Report
West Virginia LLC$100$25Annual, July 1WV Secretary of State, Annual Report
Wisconsin LLC$130$25Annual, anniversary quarterWI Secretary of State, Annual Report + Business Tax Registration
Wyoming LLC$100$60 minimumAnnual, anniversary monthWY Secretary of State, Annual Report

Consider whether or not you will be financing with the LLC

If you are obtaining financing with the LLC you need to consider two things:

1. If you’re obtaining a loan in the LLC, mortgage rates are typically higher than for personal mortgages.

The reason being is the loan is often considered a commercial loan with the bank.
I don’t know why they call it “commercial” even when the property is a zoned residential, but most banks refer to loans made to LLCs as commercial loans commercial loans.

Commercial loans are made in a different department at the bank and have different qualification requirements.

I recommend making a number of phone calls to your mortgage brokers and bankers to make sure they even issues loans to LLCs. Not every bank does, but if you make enough phone calls, you’ll find one. Trust me, they do exist. Also ask around at your local REIA… you’ll find a few good referrals this way.

2. Also consider that most banks will require you to personally guarantee the loan. This means that if your LLC defaults on the payments, the bank can go after you and your personal assets to fulfill the judgment. Short lesson here: make your damn payments on time!

Added benefit of properties owned in LLCs

In Most states, if you have more than 4 mortgages in your personal name you cannot get any more mortgages.

This is why owning your properties in LLCs is very beneficial. In theory you could have an infinite number of loans made out to all your LLCs… and you’d still be considered a first-time home buyer… meaning, you could qualify for a nice FHA, or other friendly-term financing ;-)

The reason for this is that those loans are “attached” to the LLC and they will not show up on your personal credit report (even if you personally guarantee them).

Holding real estate in specific LLCs

Another strategy that many people use is setting up different LLCs for different asset classes.

For example, if you’re wholesaling properties, you can run an entire business under one wholesaling LLC.

If you own a lot of low-income houses you can put two to three of those in one LLC.

If you own nicer, high-end income properties you can also put those under a different LLC.

Etc., etc.

Here’s the easiest way to start

Easiest way to start is to form an LLC for the first few properties that you buy and then see how the organization and management goes from there.

This way, once you purchase three or four properties you’ll know whether you want to continue and keep setting up an LLC for each property or you want to start combining them.

Or feel free to do this strategy until you have 10 properties owned in 10 different LLCs.

This is the easiest way to start as you don’t need to make a complicated decision before testing it out and experiencing it in the real world.
Cost versus benefit analysis

If you are a real estate boss and you own 50 Properties or more, you really need to consider the cost versus benefit analysis.

See the table above for all 50-state annual fees.

Also, if you have 50 properties each owned by a different LLC, you’ll have 50 different checking accounts… and you’re also be managing the paperwork for 50 different LLCs.

This could cause somewhat of a headache, especially for those who are not organized

Remember, the purpose of real estate investing is to make money enjoy your life. If you’re spending all of your time managing your organizing paperwork, sorting through crazy amounts of bills and making sure you’re writing checks from the correct account, balancing dozens of checkbooks, life won’t be very fun.

Then again, neither is getting your ass sued. So be wise. Do some serious cost vs. benefit analysis.

I’d say 10 properties or less, one LLC for each is a good setup.

11 properties or more: you’ll want to look at some more advanced real estate strategies, like Series LLCs.

Some states allow what is called Series LLCs, which can be an effective way to keep the chaos of multiple LLCs with multiple assets to a minimum if done right.  (Think franchises like Wendy’s or McDonald’s.)  These are a little more complicated, and not an option in all states, so you’ll definitely want a lawyer’s guidance on that scenario.

Hopefully at the point you need this level of complexity, you have some decent cashflow and can afford a badass real estate lawyer and/or tax advisor. They’ll help you get started on the fancy stuff… like different LPs (limited partnerships) which own groups of LLCs, or even Series LLCs if that is a better fit.

I hope this article was helpful!

Now go setup some damn LLCs and starting making those real estate monies ;)

Need help with your LLC? Have a professional LLC service file for you:
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)
Matt Horwitz
Matt Horwitz
Founder & Educator, LLC University®
Matt Horwitz has been the leading expert on LLC education for the past decade. He founded LLC University in 2010 after realizing people needed simple and actionable instructions to start an LLC that other companies weren't offering. He's cited by Entrepreneur Magazine, Yahoo Finance, and the US Chamber of Commerce, and was featured by CNBC and InventRight.
 
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.

32 comments on “Should I form an LLC for each rental property?”

Disclaimer: Nothing on this page shall be interpreted as legal or tax advice. Rules and regulations vary by location. They also change over time and are specific to your situation. Furthermore, this comment section is provided so people can share their thoughts and experience. Please consult a licensed professional if you have legal or tax questions.

  1. If you have a Series LLC, how do you title each piece of property when buying? i.e. XYZ, LLC, 1234 Knowhow Way, Austin, TX? Or just in the name of the LLC? Thanks,

    • Hi Warren, we do not teach or offer information about series LLCs, but I believe you would title each piece of property in its respective LLC unit. Please double-check with an attorney though. Apologies we can’t be more specific on that one.

  2. What if you learned about this too late? Is it possible to transfer the properties to an LLC later?

    • Hi Rodney, yes, you can. You’ll need to contact a title company for the details. You’ll also need to contact the lender to see if they’ll allow the transfer.

      • Can a property be owned by an LLC but the mortgage be in an individual’s name? We want to transfer the title of the home to an LLC but do not want to change the mortgage in anyway.

        • Hi Sara, this can be accomplished by filing a quitclaim deed. Technically, you are breaking the terms of the mortgage agreement, however, it is a common practice in real estate investing. If you go this route, we recommend speaking with an attorney for assistance. Hope that helps.

  3. I have rental property in Massachusetts, but I live in Vermont. Can I set up an LLC in Vermont for the Massachusetts property?

    • Because you are doing business in Massachusetts, you’re supposed to form the LLC there. Using a Vermont LLC for real estate located in Massachusetts may require the registration of a Foreign LLC (the Vermont LLC registered as a Foreign LLC in Massachusetts). Hope that helps.

  4. If I set up an LLC to purchase a property, can I still pay for the property out of my own personal bank account? Or do I have to set up a a separate bank account for the LLC to use to make the purchase?

    • You’re supposed to make a capital contribution (deposit) into the LLC’s bank account, then take proceeds out of there for settlement.

  5. Currently have 3 rental properties under our West Virginia registered LLC. Looking to purchase another rental unit in North Carolina. Can we purchase that property using our West Virginia LLC company name?

    • Hi Sharon, you can, meaning the title company will likely allow it, however, it’s not technically legal. If the West Virginia LLC holds a rental property in North Carolina, then it’s illegally transacting business in the state and you’d need to register the West Virginia LLC as a Foreign LLC in North Carolina. So you could either take care of the Foreign LLC registration before closing, or another option is to form a North Carolina LLC and then have the NC LLC take title to the property in NC. Hope that helps.

  6. Along with a separate EIN and separate bank account, should I also get a separate credit card for each LLC? This is to correctly allocate credit card expenses to the correct LLC.

    Ideally, I wouldn’t want to apply for a new credit card for each LLC, what I would want is for my credit card vendor to issue me a new and different credit card number for the new LLC, all tied to the same single credit card account. This way I get multiple statements for all my credit card numbers and I can allocate all expenses on one statement to a specific LLC, rather than having to go through one statement and individually allocate them to the correct LLC.

    Are there any vendors that offer the service of multiple credit card numbers for the same account. (Note I’m not talking about virtual credit card numbers)

    Thanks
    Ameya

    • Hey Ameya, I’m quite familiar with business credit cards, and I’ve never heard of anything like this. You could of course call a few credit card companies to check, but as far as I’m aware, they won’t let you “merge” accounts like that. Hope that helps.

  7. My Husband and I just bought a dental office in Texas. The owner is financing the practice and the building as one unit. It is a small practice in a small town. We are going to pay ourselves rent. I thought it would be a good idea to have an LLC but after reading about it on the internet I think I’m making it more complicated than it is and potentially spending a lot of time and money on this..My husband has malpractice insurance and we have liability insurance..Any suggestions??

    • Hi Margot, since you said “just bought” a dental office, I’m assuming you’ve already closed on the transaction? And if so, then you’ve already taken title until yours and your husband’s name, correct? Malpractice insurance is for malpractice. There are a number of other liability issues with running a business so people form an LLC to separate their business assets from their personal assets. We have more info on protecting your assets here: LLCs and asset protection. There may also be additional insurance coverages you and your husband may want to consider. Also, if you form an LLC, you’ll need to transfer the assets from your names to the LLC. If you purchased property, you’ll need to re-title the property and go through another closing. Hope that helps.

  8. Great article! I hope you can answer a few tough questions for me…
    1. For each LLC property, is it cost effective to file a tax return for each one and also hold a business checking account for each? (For 10 properties or less)
    2. With 10 different bank accounts how do you “pay” yourself? Just transfer portions from all 10 to your main buisiness account?
    3. With buisinness operating expenses like property management (1 company for all 10), travel, vehicle, phone, internet… how are those collective expenses passed on to each individual LLC? Divide by 10?
    4. If my main LLC owns 10 differnt LLCs, is the main LLC subject to lawsuits if 1 of the property LLCs get suied?

    I know its a handful, hope you can help
    Thanks in advance

    • Hey Roy, thanks!
      1. If the LLC has activity, then depending on how the LLC is taxed, it’ll have a Schedule in your personal tax return in addition to any applicable Forms. If you have separate LLCs, then you’ll want them to have separate bank accounts. If not, then that opens you up to the risk of the corporate veil being pierced.
      2. Best to chat with an accountant on this. There’s not a black and white answer.
      3. See #2.
      4. Not if the entities are set up and run properly.
      Apologies we couldn’t get into depth on your tax questions. You really need someone to look at this more deeply with you. Thanks for your understanding.

  9. Hello, I set up the LLC to purchase a two family dwelling for rental and the seller states I set up the LLC incorrect, this was a foreclosure property and I am buying it from that entity. Is there such a thing as a innapropriate LLC?

    • Hi Daniel, this is a challenging question to answer as “inappropriate” could mean a number of things. Also, not sure why the seller has any say in how you form your LLC. Might want to run this question by the title company as well as a real estate attorney. Hope that helps.

  10. Hi, I have 2 rental properties that were purchased through traditional mortgage and then transferred to a single LLC.
    Even though they are both under the same LLC, can I set up multiple dba’s so that I can open separate bank accounts for each property to help keep the accounting separate?
    Thanks

    • Hi Dave, great question. Yes, you can. An LLC can multiple DBAs. And yes, that would make your banking and accounting life easier ;)

  11. My family has an LLC that has several bank accounts titled under it as well as a few CD’s. We are going to invest in a rental property. Do we need to open another LLC or is it ok to title our first real estate investment under this LLC even though it already has the bank account and CD investments? Thanks!

    • Hi Lisa, there is no rule that an LLC must only have one asset titled in it. It’s up to you. However, it may be worth considering, or having a conversation with an attorney, about the pros and cons of using the existing LLC vs a new LLC. If there is an issue at your rental property and the LLC is sued, that could jeopardize the existing assets. Hope that helps.

  12. Hi Matt! We are located in California, and we are in the process of purchasing a multi-family property that is located in Texas, and the deal is syndicated, so we are passive investors. We wanted to set up an LLC for this Texas property, but I wanted to check if the LLC would need to be registered as a Foreign LLC, even though the deal is syndicated.

    • Hi Alex, the California Franchise Tax Board does have far reach. When you say “we”, is this you and a business parter… or someone else? How much of this Texas LLC will you own? What management authority will you have over this Texas LLC? What will you be doing in California on behalf of the Texas LLC?

  13. What about setting up Series LLCs? I have heard that you can set them up much the same as subdivisions of a corporation and it is less expensive than multiple LLCs. I would love to see your research information on Series LLCs.

    • Hi Tal, we don’t cover Series LLCs at this time because they are much more complex that they are made out to be. And there isn’t established case law regarding taxation and liability. We might cover this in the future. We recommend speaking with a few attorneys and accountants. Thank you for your understanding.

  14. My husband and I own 3 rental properties and we have an S Corp only for tax purposes and haven’t changed the title. We are in the process of establishing 3 separate LLC for the rentals. Question is do we need to file a business license for each rental/LLC?

    • Hi Rosie, we recommend speaking with an accountant first. You may not want to use S-Corp taxation for rentals. The need for a business license and/or rental license will depend on the city where the property is located. Hope that helps.

  15. Hi Matt,
    I made the mistake of placing four (4) rental properties under one LLC. Do you recommend separating them and placing each under a separate LLC. If so, what process do I have to go through to accomplish such an operation? None have a mortgage, located in Nevada and all are under the same property management company.
    Thank you kindly,
    Ara

    • Hi Ara, unfortunately, there isn’t a “black and white” answer to this. Some investors have one LLC per property and others have 20+ properties in one LLC. Having said that, generally speaking, isolating liability is a good idea. You’ll want to assess the overall potential liability, look into insurance policies, and look at the administrative costs and extra work (ex: Nevada LLC Annual List and State Business License renewal, bookkeeping costs, tax filings, etc.). It might help to ask the same handful of questions to a few accountants and attorneys and see if that helps bring you any clarity.

      If you were to form new LLCs, you’d then need to transfer title from the first LLC to the new LLCs. You can work with a local title company and/or a real estate attorney to handle the closings/deed transfers. Hope that helps.

       

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