Creating a Rental Property LLC in Indiana

What to know before creating a rental property LLC in Indiana

Before you form your Indiana LLC, let’s discuss why choosing an LLC is a good idea. First, LLCs have limited liability protection for their owners (i.e. “members”), and thus protect the owners’ personal assets from LLC activities. Second, LLCs provide pass-through taxation. This means that LLC income is taxed at the personal tax rate of each member. Third, an LLC owns its property separately from its members, and thus additionally protects a member’s property from LLC actions.

To further enhance the benefit of a rental property LLC in Indiana, Indiana now recognizes “series LLCs.” Series LLCs comprise a master LLC and one or more subsidiary LLCs which are known as “series LLCs.” The benefits of using a series LLC to own rental property are twofold. First, a series LLC can more easily attract real estate investors in that all investment is in the master LLC and not in several different rental property series LLCs. Second, each rental property is insulated from liability issues arising in another rental property; each rental property is owned by an independent series LLC.

How to form an LLC for your Indiana rental property:

Step 1: Choose LLC Name

When selecting a name for your LLC, be sure to choose one that meets Indiana’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: Select Registered Agent

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

Step 3: File Articles of Organization

To officially form your rental property LLC, you need to file Articles of Organization with the Secretary of State and include the appropriate filing fee. With our LLC Formation Service, we can file your documents for you. 

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 dissolving 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. An EIN is like a social security number for your LLC. 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. 

Step 6: Transfer Title and Inform Attached Parties

After forming your LLC, you can then begin to look for properties to buy. On the other hand, if you already own property, you’ll need to transfer it into the LLC.

If you have financing for the property, then check with your mortgage company before you transfer title to the property. If the mortgage company okays your transfer, next confirm that they will make the necessary amendments to the mortgage documents to reflect the transfer.

If you have tenants in the rental property, it’s a good idea to let them know that the LLC is the new landlord. To reflect that, you will need to make amendments to the lease. These actions are very important. All communications and payments need to be made to the LLC as landlord and not to you.

Who should form an Indiana LLC for their rental property?

Anyone who plans to rent property, especially residential property, may want to consider forming an LLC. Separating your personal assets from your business activities is sound business practice. Further, if you plan to expand your rental business into more than one property, then a rental property LLC in Indiana is not only prudent but also good business planning.

Forming an LLC prior to purchasing a rental property is not required, but we strongly suggest it. The reason for this is that real estate transactions are almost exclusively centered on the buyer. For instance, it’s the buyer who will sign the purchase contract and who will apply for financing, and the buyer’s identity will drive the availability of financing, the amount, rate, and term.

If in the event that you already own rental property, there will be some extra work to transfer it into the LLC. To begin, you will need to transfer the deed to the LLC and record it in the local land records. In addition, if you have financing on the rental property, you will need to check with your financial institution to make sure the transfer is OK with them. Finally, keep in mind that transferring the property may be a taxable event.

How we can help

We have a whole host of services to help you form and run an Indiana rental property LLC. We also offer our Worry-Free Compliance Service to help you stay in compliance, and Accounting Services to help you maintain accurate records. Contact us to see how easy it is for you to take this next step in rental property ownership.