Creating a Rental Property LLC in Minnesota

Benefits of creating LLCs for rental properties in Minnesota

Many people choose to own and rent out their real estate properties under their own individual names. Doing so is perfectly acceptable and legal. However, there are a number of benefits that come with creating an LLC for your rental properties instead. Some of these benefits include:

• Personal liability protection
• Pass-through taxation
• Separation of business and personal property

Series LLCs

Additionally, some states permit the formation of what’s referred to as a series LLC (SLLC). Through a series LLC, you can create one overarching umbrella LLC with multiple “series” underneath it for each investment property you own.  This can provide additional protection for each separate property’s assets. Importantly, however, you may not currently form a series LLC under Minnesota law. Therefore, until state law is changed, this only applies to you if you own property outside of Minnesota and wish to set up a series LLC in a state where it’s allowed.

What to know before creating a rental property LLC in Minnesota

Creating a rental property LLC in Minnesota may not be for everyone. Thus, before you take any next steps, there are a few key things to keep in mind. 

How to form an LLC for your Minnesota rental property

Step 1: Name Your Minnesota LLC

When selecting a name for your LLC, be sure to choose one that meets the state’s 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: Appoint a Registered Agent

Businesses in Minnesota 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 Minnesota registered agent, we can help you find one.  

Step 3: File Minnesota Articles of Organization

To officially form your rental property LLC in Minnesota, you need to file Articles of Organization with the Secretary of State’s 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. 

5. Apply for an 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. 

After you formally set up and register the LLC entity with the state, you’re ready to proceed with the next steps. 

Transfer title and additional steps

If you own your rental property or properties outright, you’ll need to transfer title to the property through a transfer deed from yourself to the LLC. However, if there’s an existing mortgage on the property, don’t transfer ownership quite yet. First, speak with your lender to verify whether they will require any additional paperwork or changes to the terms or rates of your loan. 

Once you’ve executed the deed, you must then file it with the county where the real estate is located. Additionally, if applicable, don’t forget to pay any requisite title transfer tax. 

Finally, make sure to update any existing tenants, and draft or update any rental agreements to reflect the ownership change. 

Who should form a Minnesota LLC for their rental property?

Many people can benefit greatly from setting up an LLC for a rental property in Minnesota. In general, forming an LLC business entity is a great idea for anyone who’s considering renting out their property. This is true regardless of whether you intend to rent out the property for residential or vacation purposes. 

In most situations, it’s easier to create your LLC first, before investing in real estate. Then, any properties you buy can be titled in the name of the LLC from the outset. But you don’t necessarily have to do things in this order. 

Even if you’re already renting out your property, you can still benefit from the many advantages that come along with creating a Minnesota real estate LLC. It will simply require some additional paperwork. In short, all you’ll need to do is set up the LLC entity and then transfer any properties you may own from yourself, in your individual capacity, to the LLC.  

How We Can Help

If you’re feeling overwhelmed by the thought of owning and operating a rental property LLC in Minnesota, you’re not alone. Many entrepreneurs, both new and more experienced, feel some trepidation when starting a new venture. Fortunately, however, you don’t have to navigate this process on your own. 

In the long run, setting up an LLC is one of the best things you can do to protect yourself as you start and grow your business. Let us help you write a business plan, then start, manage, and grow your rental property LLC in Minnesota today.