If you're planning on investing in rental property in Wisconsin, you may be wondering the best way to protect your personal assets while operating your business. Creating a Limited Liability Company (LLC) is a common way for landlords to shield themselves from personal liability while still enjoying the tax benefits and flexibility of owning rental property. Here's how to create a rental property llc in wisconsin.
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What is an LLC?
A Limited Liability Company is a business structure that combines the liability protection of a corporation with the taxation benefits of a partnership. LLCs are a popular choice for small business owners and landlords because they offer protection against personal liability while providing the business with flexibility and pass-through taxation.
An LLC is created by filing articles of organization with the Wisconsin Department of Financial Institutions, creating a "memorandum of understanding" (the operating agreement), and obtaining any necessary business licenses and permits.
Step 1: Choosing a Name
The first step in creating your Wisconsin rental property LLC is to choose a name for your business. The name must be unique and not currently in use by any other LLC or corporation in the state of Wisconsin.
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You can research the availability of names on the Wisconsin Department of Financial Institutions' website. Once you've selected a name, you'll need to register it with the state as a trade name.
Step 2: Filing Articles of Organization
The next step is filing articles of organization with the State of Wisconsin. This document can be filed online through the Wisconsin Department of Financial Institutions' website.
During the filing process, you'll need to provide the name and address of the LLC, the name and address of the LLC's registered agent, a description of the LLC's purpose, and the names and addresses of the LLC's organizers.
You'll also need to submit a $170 filing fee with your application.
Step 3: Create an Operating Agreement
The operating agreement is a legal document that outlines how the rental property LLC will operate, including the rights, responsibilities, and obligations of each member, the LLC's voting process, and how profits and losses will be allocated.
Although not required by law, it's important to create an operating agreement as it provides clarity and protection for all members. It will also be necessary if any legal issues arise.
An operating agreement template is available on the Wisconsin Department of Financial Institutions' website, but it is recommended that you consult with a lawyer to ensure that it meets your specific needs.
Step 4: Obtain Necessary Permits and Licenses
Rental properties in Wisconsin must comply with various state and local regulations and laws. Additionally, you may need to obtain permits and licenses relating to zoning, building codes, and landlord-tenant law.
Before you begin renting out your property, make sure you have the necessary permits and licenses and that you're compliant with local and state regulations to avoid any legal troubles down the line.
Step 5: Open a Business Bank Account
To keep your personal finances separate from your rental property LLC's finances, set up a separate bank account for your business transactions. All rent payments, maintenance fees, and other income and expenses related to your rental property should go through this account.
Additionally, having a dedicated business account can improve your LLC's business credit score and make it easier to manage finances in the long run.
Conclusion
Creating an LLC for your rental property in Wisconsin is a smart way to protect your personal assets while operating your rental business. By following these simple steps, you'll be well on your way to forming a legally compliant rental property LLC that is set up for success. However, it's essential to consult with a lawyer before making any legal decisions to ensure that you're taking all necessary precautions and that your LLC is valuable.
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