Creating a Rental Property LLC in Virginia

Benefits of creating a rental property LLC in Virginia

Liability Protection

Having a distinct legal entity, such as an LLC, to own your rental properties provides you legal protection from lawsuits. Your personal assets are at risk in a lawsuit if you do not have a rental property LLC in Virginia. If someone sues you and wins a judgment, they could potentially take your personal assets, such as a home, vacation property, or investments to pay for the judgment. But if the rental property is solely owned by a limited liability company, your personal assets are safe. 

Pass-Through Taxation

Under the pass-through taxation method, business income passes through an LLC to its owners. There are no taxes at the business level. The money goes to the owner of the LLC, and the tax is paid at their individual rate. If you don’t use a rental property LLC in Virginia then you potentially could pay taxes once at the corporate level and once on your personal taxes.

Separation of business and personal property

There are advantages to keeping your business interests distinct from your personal possessions. When all your assets are kept in one container, you run the risk of facing a number of difficulties. Lawsuits may expose you to a variety of dangers. In addition, if you file for Chapter 7 bankruptcy liquidation, all of your personal belongings, including rental properties, could be subjected to bankruptcy liquidation.

Series LLCs for real estate investors in Virginia

A series LLC is a type of limited liability company that allows the owners to establish different “series” under the LLC umbrella. Under the LLC umbrella, each series is considered a separate business with the ability to own property and assets. A series LLC is often used by real estate investors that have many rental properties, with each series owning an individual building. This protects each series from any liabilities incurred by other series.

What to know before creating a rental property LLC in Virginia

Establishing a property management company in Virginia is simple and straightforward. Even though the LLC is legally responsible, you will still retain control of the business. But you, as the person, will not be subject to legal liability. An LLC offers both economic and legal advantages, which we’ll touch on now. 

Steps to form an LLC for your Virginia 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 a 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 Virginia LLC for their rental property?

If you’re an inexperienced rental property buyer or already own numerous rental houses in Virginia, chances are you’ll want to establish an LLC for your rental business. If you currently own real estate in your name, all you need to do is transfer the ownership rights to the LLC. Although this takes a little bit of effort and requires some filing fees, the benefits far outweigh the costs. However, forming the LLC first and then purchasing your new rentals through it is the most straightforward approach.

How we can help

Our team is only a few clicks away to assist you in establishing and maintaining an LLC in Virginia. Our clients benefit from the formation and compliance services we provide, which offer a simple straightforward method to create a successful rental firm that is organized and successful.

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.