Table of Contents:
Disclaimer: We are NOT tax professionals or lawyers; we recommend consulting with a tax professional or lawyer for any advice specific to your situation or before making any big decisions.
If you don’t plan to transfer your property into an LLC, skip to post 2.3 (rental insurance). As of April 2024, we don't have posts on setting up a sole proprietorship, partnerships, or S-corporation, but we’ll plan to cover those in the future.
In this post, we’ll walk you through the steps we took to set up our LLC. If you’re still unsure about doing an LLC, read our last post 2.2.2 that outlines the pros and cons of each business entity option.
With Rental Revelations, when providing guidance, we’ll strive to highlight both the most cost-effective and the easiest approaches; however, it’s important to note that the easiest route often comes with additional costs.
11 Steps to Set Up an LLC & Transfer Your Property (Cheapest Way)
It took us 14 active hours to understand and research each of these steps to ensure that we weren’t missing anything. Since everything is in a single location, hopefully it’ll take you significantly less time than us. We were able to complete steps 1-11 in about two weeks and paid $506 from start to finish, which we didn’t think was bad.
Step 1: Verify property transfer with bank
Contact your mortgage lender to ensure your property transfer doesn’t:
Violate any of your loan terms
Cause issues for future refinancing, which may trigger additional costs and eligibility requirements if you refinance to a lower rate in the future
Trigger a ‘due on sale’ clause, which requires you to pay the outstanding balance of your mortgage in full
We secured our loan with US Bank when we purchased our home in 2020, when we emailed our point of contact, she had no issues with us switching our property title from our personal name to an LLC.
Pro Tip: we recommend emailing your mortgage lender to make sure you have their responses in writing for future reference
Step 2: Choose your LLC Name
Admittedly, we weren’t very creative when choosing our LLC name - we used our last name and added “LLC” to the end of it. To ensure you’re successful, select a unique and compliant name for your LLC.
A complaint LLC name typically involves not confusing the public, which could include ensuring uniqueness, meaning the name cannot be too similar to an existing name in a way that could confuse the public. Or avoiding restricted & prohibited words unless you have a specific license or permission (e.g., bank, attorney, university, FBI, Treasury, State Department etc.).
Some states have additional specific rules about what can and cannot be included in an LLC name - double check your Secretary of State website for additional guidelines.
Once you choose a business name you can check your LLC name availability by going to your state’s Secretary of State website. Each site is structured slightly different, but should have a search option to see existing LLC names (the image to the left is Washington’s)
Step 3: Select a Registered Agent
A registered agent is an individual appointed to receive legal documents, government correspondence, and other important notices on behalf of your LLC. A registered agent can be yourself, a friend, or a service like Bizee, Northwest Registered Agent , or LegalZoom - just be sure that person meets the requirements.
There isn’t usually a separate paperwork to submit your registered agent, you will share these details with the state in the Articles of Organization (next step), if you’ve already submitted your Articles of Organization, you will have to submit an amendment.
To learn more about the requirements, pros & cons of hiring a Registered Agent, and detailed steps to record your registered agent check out post 2.2.4.
Step 4: File Articles of Organization
The Articles of Organization (AOO), also known as the Certificate of Formation (COF) in some states, is the document filed with the state government to officially form an LLC. This form can be found and submitted on your state’s Secretary of State website (here is a link to all of the Secretary of State websites).
Once you file your AOO or COF, your state will provide you with a Unique Business Identified (UBI), which is a unique identifier assigned by state governments to identify a business entity within their jurisdiction. Depending on your state, a UBI can also be called an Entity ID or Business ID. The UBI is typically used for administrative purposes within the state, such as business registration, licensing, and regulatory compliance
To understand prerequisites and know what to expect, see our step-by-step guide on how Nick submitted our Articles of Organization in post 2.2.5.
Step 5: Obtain an Employer identification Number (EIN)
The EIN is also known as a Federal Tax Identification Number or Tax ID number, an EIN is similar to your personal social security number in that it is a unique number given to you by the IRS. EINs are primarily used to file tax returns, pay taxes, and open business bank accounts.
Applying for an Employer Identification Number (EIN) is a free service offered by the Internal Revenue Service and takes 10-15 minutes to submit:
To learn more about when an EIN is needed and the detailed steps to get an EIN read post 2.2.6.
Step 6: Draft an Operating Agreement (Optional)
In post 2.0, we mentioned the benefits of having an operating agreement (especially for Multi-Member LLCs), which outlines ownership percentages, roles & responsibilities, and succession plans, providing clarity and guidance for future management and ownership transitions.
While operating agreements are not usually required by law in most states to form LLC, we recommend you create one. We used LawDepot to complete a free operating agreement, we liked it because it asked you simple questions and generated an operating agreement personalized to your state.
See post 2.2.7 to see what is typically included in an operating agreement, why you should create an operating agreement, and how to draft one.
Step 7: Determine Tax Classification of your LLC
By default, a single-member LLC is treated as a disregarded entity for federal tax purposes, meaning it is taxed as a sole proprietorship. A multi-member LLC is taxed as a partnership by default. However, if you want your LLC to be taxed as a corporation, you would need to file Form 8832 to elect corporate tax treatment - we highly recommend talking to a tax professional before making this decision.
Choosing to form an LLC and then electing corporate tax treatment can offer flexibility and simplicity in other aspects of business operation as LLCs generally have fewer compliance requirements and more flexible management structures compared to corporations
To change the default tax classification you will need to Submit Form 8832 to declare the Tax Classification you will report your taxes as. Note, this form cannot be filed electronically and must be mailed to your applicable Department of Treasury Office (you can find the correct address specific to your state on the first page in the form).
Step 8: File State Annual Report
Once your Articles of Organization is created, you will be required to file your Annual Report with your Secretary of State office. We needed to file this within the first 120 days of creation in Washington so pay attention to deadlines - check your state’s specific annual filing requirements here.
This step is pretty straightforward and only takes 10-15 minutes, but check out post 2.2.8 where we outline necessary information needed.
Step 9: File Beneficial Ownership Information (BOI)
Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or control a company. The U.S. government collects this information to make it easier to identify crimes such as money laundering through shell companies.
You need to submit your BOI information within 30 days of your LLC creation. It is free to submit this information and you only need to submit BOI information when there are updates to report (not annually). Go to the FinCEN website to submit information.
Pro Tip: If you have an accountant, he or she will likely offer to do this for you for free.
In post 2.2.9 we highlight why BOI is necessary, who needs to report BOI, and the detailed steps for BOI submission.
Step 10: Transfer Property Title to LLC
This step is only needed if the LLC doesn’t already own your property (i.e., you didn’t buy the property with an LLC). To transfer your property title to an LLC, you need to file, notarize, and record a Quitclaim Deed which is a legal document used to transfer ownership interest in a property from one party to another..
Quitclaim Deeds are good if you’re transferring personal property from your name to your business since you know what you’re getting, but they don’t provide guarantees or warranties of the title. If you need guarantees of a title, you should consider a Warranty Deed which provides certain warranties or guarantees about the title being transferred.
We transferred our personal property to our LLC so we leveraged a Quitclaim Deed, we used LawDepot ($41) to draft a Quitclaim Deed for us
Next, you need to get your Quitclaim Deed notarized, there are a few options for notarization:
Most banks offer this service for customers, we are Chase customers so we went to a branch and got our documents notarized for free
If you don’t want to leave your home, there are online notaries such as Notarize ($25) where you can get documents notarized via video call
Certain UPS offices offer notarization ($10-$15), we recommend calling the UPS location as not all UPS employees can notarize documents
Lastly, to be legally effective, a Quitclaim Deed must be properly executed and recorded with the appropriate government office. We had to mail our documents to the Washington Recording Office and paid $205 to file it. You can find your county recorder office here with instructions on where to file.
Pro Tip: Make sure you update any existing rental agreements, insurance, etc. to reflect the new ownership.
To learn more about the pros & cons of a quitclaim deed, what a warranty deed is, and the detailed steps to complete a quitclaim deed check out post 2.2.10.
Step 11: Save & Upload all Documentation
Add all documentation to your Google Drive (or location where you store business documents) - see post 2.1 for recommended folder structure
Set Up an LLC & Transfer Your Property (Easiest Way)
If you really want a hands off approach, you can hire an attorney to help you transfer your property into an LLC, this typically costs between $600-$1,000 + state filing fees.
A cheaper option that will reduce your workload and give you access to an attorney is LegalZoom’s Premium offering:
Download Our Project Plan Tool
In our next post, we’ll be covering how to set up your Articles of Organization. Don’t forget to subscribe to get access to our project plan tool for free:
The project plan will help you stay organized and on track - the file contains detailed steps with duration estimates, resource links, and contextual information in a single location.
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