Create a Rental Property LLC in Massachusetts

Steps to form an LLC for your Massachusetts rental property

We can make setting up a limited liability company in Massachusetts simple and easy. The steps are:

Transfer title of the property to the LLC

Once you’ve completed those five steps, you’ll be good to go! However, if you obtained the rental property that you want to use prior to forming the LLC, there are additional steps:

• File an updated deed (one showing the LLC as the property owner) with your local township
• Pay any applicable title transfer tax

Remember that transferring your property to the LLC can cause disruptions to your financing arrangement. For that reason, we recommend that you contact the mortgage company before making the transfer. You may need to complete additional financial paperwork for the property or negotiate new financing terms and rates. 

Last, but not least, inform all current tenants or renters about the ownership change in writing. Also, update any current and future leases and rental agreements to reflect the new property owner. 

What to know before creating a rental property LLC in Massachusetts

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

Benefits of creating LLCs for rental properties in Massachusetts

Establishing a rental property LLC in Massachusetts is simple and straightforward. Even though your properties will be officially owned by the LLC, you still have control and responsibility for them because you own the LLC. Creating an LLC provides both financial and legal benefits that don’t exist without a rental property LLC in Massachusetts.

Liability protection

Having a separate legal entity such as an LLC own your rental properties affords you legal protection against lawsuits. Without a rental property LLC in Massachusetts, your personal assets could become tied up in a lawsuit. For example, let’s say someone slips and falls on your rental property sidewalk and files a lawsuit against the landlord. If the property is solely in your name, then that plaintiff can attempt to get at all of your personal assets to pay for whatever judgment a jury awards.

But if the rental property is separately owned by a limited liability company, then the only thing the plaintiff can go after is the insurance policy and assets owned by that particular LLC. It means all of your personal assets are safe, like your home, vacation home, investment properties, or other assets.

Pass-through taxation

Pass-through taxation is a way to pass business income through the corporation, LLC, or other business entity. The income passes to the owner of the LLC who is taxed at their individual tax rate. Without a rental property LLC in Massachusetts, you might pay taxes twice on the rental income you receive — once at the business level and once on your individual taxes.

Separation of business and personal property

As mentioned above, there are benefits to having your business assets separate from your personal assets. When your assets are owned in one basket, this opens you up to all sorts of negative possibilities. Lawsuits could potentially take everything from you. Also, if you declare personal bankruptcy, all your personal assets, including your rental properties, might be subject to bankruptcy. 

Series LLCs

A series LLC is a special kind of limited liability company that allows the owners to establish different “series” under the LLC umbrella. Each series is treated as a separate company under the umbrella LLC and can own property and assets that are separate and from the other series. This protects each series from the liability that could potentially occur under another series. Unfortunately, at this point, Massachusetts doesn’t offer series LLCs.

Who should form a Massachusetts LLC for their rental property?

If you’re a first-time buyer or even if you already own several rental properties in Massachusetts, there’s a good chance you’ll want to form an LLC for your rental property. If you currently possess real estate in your own name, all it takes is a little extra time and effort to properly transfer the ownership rights onto the LLC. However, creating the LLC first and then purchasing your new rentals through it is the simplest approach.