Creating a Rental Property LLC in Montana

Benefits of creating LLCs for rental properties in Montana

There are a number of benefits to creating an LLC for rental property in Montana. Forming a limited liability company can help keep you organized, structured, and protected. Here are some of the important things to consider. 

Liability protection

Limited liability companies provide protection for your personal assets. Any debts or legal obligations that arise are paid by the business and don’t put your personal finances at risk. The business is a separate entity from its owners or members. 

Pass-through taxation

Unlike traditional corporations where the company itself and individual shareholders pay taxes, pass-through entities don’t pay taxes as a company. The earnings are “passed through” to the members’ income taxes, which avoids double taxation. 

Separation of business and personal property

Forming a rental property LLC in Montana allows you to open separate business accounts under the company name. This is important to help keep business and personal assets separate. Taxes are hard enough without trying to dig through your account to determine what’s what. 

Series LLCs

A series LLC is a group of separate limited liability companies that exist under the umbrella of one parent LLC. This structure is common for real estate investors with multiple properties because each property can be its own “series.” Each series has separate assets and liabilities from the other series. This type of LLC is also used for companies that have multiple brands or product lines. Not all states allow series LLCs. But Montana is one of the relatively few states that do recognize series LLCs. So if you live and do business here, you can take advantage of using this unique business entity.

What to know before creating a rental property LLC in Montana

There are some important benefits to forming an LLC for property owners in Montana.

How to form an LLC for your Montana rental property

Forming your limited liability company is a pretty straightforward process, but there are a number of steps. Here is a quick guide on what you need to do to form your Montana real estate LLC. 

Step 1: Name your Montana LLC

Choosing a name can be a fun process. Make sure your name isn’t misleading and conveys what your company does. Check with state LLC naming guidelines. Also, be sure to check that no other Montana business is using the same or similar name. 

Step 2: Appoint a Registered Agent 

A registered agent is a person or business assigned to receive your business and legal correspondence. This person must be available during all business hours, which is why it’s a good idea to not accept this task yourself. We can help you find a Montana registered agent that fits your company’s needs. 

Step 3: File Montana Articles of Organization

Once you have chosen your name and registered agent, it’s time to register your rental property LLC in Montana with the Secretary of State. The Articles of Organization serve as the official document that causes your business to legally exist. 

Step 4: Create an Operating Agreement

An Operating Agreement is an internal document that services as detailed guidelines for how your limited liability company is run. This document isn’t filed with the state but should be readily available as a reference whenever conflict arises. The Operating Agreement may include voting structures, manager and member roles, ownership transfers, conflicts of interest, and more. Get started with our Montana Operating Agreement template. 

Step 5: Apply for an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is basically a social security number for your business. This number allows you to open business accounts, pay taxes, and hire employees. Obtain your EIN through the IRS. 

Transfer property to the LLC

If you have an existing property, you’ll want to transfer it to the limited liability company. File a Realty Transfer Certificate (Form RTC) with the County Clerk and Recorder at the same time the deed is filed. If there’s a mortgage or loan on the property, you’ll need to inform the lender. However, this may change the terms of your agreement, so it’s best to do have a discussion with your lender before making the transfer. 

Update the lease

If you have tenants already in the property, update the lease or rental agreement to reflect the new ownership. You’ll want to also inform your tenants of the change. 

Who should form a Montana LLC for their rental property?

Forming an LLC for rental property in Montana is a great idea for anyone who owns property, whether it’s for vacation, long-term residence, business, or land use. If you haven’t invested in property, but intend to, consider forming your rental property LLC in Montana before making your purchase. If your limited liability company already exists, you can purchase the property in the company name to avoid having to transfer the property. 

How We Can Help

Once you have your real estate limited liability company formed, we can help you through all of the other business tasks that arise. We can help with annual reports, getting business licenses, writing your business plan, and helping you with general compliance. In short, we exist to make owning a business easier and we can’t wait to help you grow your rental property LLC in Montana.