If you own property in Kansas that you plan on renting out, you may want to consider creating a rental property LLC. A limited liability company (LLC) can protect your personal assets from any potential lawsuits or debts related to your rental property.
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Forming a rental property LLC is a fairly straightforward process, and we’ll break down the steps below.
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Step 1: Choose a Name for Your LLC
First things first, you’ll need to come up with a name for your rental property LLC. This name should not already be in use by another business entity in Kansas. You can check the availability of names on the state of Kansas’ Business Name Availability search page.
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Keep in mind that your LLC name should be related to your rental property business and clear and easy for renters to understand. You should also make sure your chosen name follows the state’s guidelines and has the proper designator (“LLC,” “L.L.C.,” or “Limited Liability Company”).
Step 2: Choose a Registered Agent
In Kansas, all LLCs must appoint a registered agent. This person or entity is responsible for accepting legal documents, such as lawsuits, on behalf of your LLC. The registered agent can be a resident of Kansas or a corporation authorized to do business in the state. If you’re a Kansas resident, you can serve as your own registered agent.
Step 3: File your Articles of Organization
The next step is filing your Articles of Organization with the Kansas Secretary of State. These articles are a legal document that establishes your rental property LLC and includes details like your LLC’s name, registered agent, address, management structure, and Member information.
You can file your articles online through the Kansas Business Center website or mail them with a check or money order. The filing fee for LLCs in Kansas is $160.
Step 4: Create an Operating Agreement
Although not a legal requirement in Kansas, an operating agreement is an essential document to have for your rental property LLC. This agreement outlines your LLC’s ownership structure and management policies, member responsibilities, and how profits will be distributed.
Creating an operating agreement can help establish clear expectations among LLC members and protect your business in the event of disputes. We recommend consulting with an attorney to draft an operating agreement that aligns with Kansas’s LLC laws and best practices for rental property management.
Step 5: Obtain Necessary Licenses and Permits
In addition to forming your rental property LLC, you may need to obtain relevant licenses and permits to operate your business in compliance with state and local regulations. For example, if you plan on serving alcohol on the property, you’ll need an alcohol license.
The state of Kansas requires a retail sales license for the sale of tangible personal property or services at retail. The sales tax rate in Kansas is 6.5%. Additionally, you may also need to obtain a property management license.
Note that these requirements may vary depending on the city and county where your rental property is located. We recommend conducting research on the specific permits and licenses required for your area.
Step 6: Buy Insurance
Liability insurance is crucial for rental property owners. It protects your LLC from financial damages resulting from accidents, injuries, or property damage on your rental property. We recommend purchasing general liability insurance, including Property Insurance and Errors and Omissions Insurance.
Purchasing insurance can also demonstrate to potential renters that you’re committed to protecting their safety and property.
Conclusion
Creating a rental property LLC in Kansas can provide benefits like liability protection for your personal assets and clear ownership and management policies. By following the steps outlined above, you can form your LLC and start pursuing your rental property business goals.
Keep in mind that forming an LLC may not absolve all personal liability, and you should consult with an attorney to understand all risks and legal requirements involved in rental property ownership.
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