Creating a Rental Property in Missouri | From Investment to Income

Missouri Rental Property LLC

In the world of real estate investing, creating a Limited Liability Company (LLC) for rental properties has become an increasingly popular strategy for property owners in Missouri. An LLC provides numerous benefits, including limited liability protection, potential tax advantages, and improved professional credibility. This guide will walk you through the steps to Create a Rental Property LLC in Missouri, helping you navigate the process and ensuring your investment is well-protected and structured for success. From researching local laws and regulations to drafting a comprehensive operating agreement, we’ll provide you with the essential information to establish and manage your Rental Property LLC effectively.

To learn everything about creating a rental property in Missouri, Webinarcare Editorial Team recommends reading the whole article until the end.

What is a Rental Property LLC?

A rental property LLC in Missouri refers to a limited liability company (LLC) formed specifically to own, manage, and rent out residential or commercial properties in the state. Starting an LLC in Missouri is popular with investors and property owners because they provide personal liability protection related to the property, separating the owner’s assets from any debts or legal issues that may arise concerning the property.

Creating a rental property LLC allows owners to manage their investments better, take advantage of potential tax benefits, and protect themselves from lawsuits or financial liabilities related to their real estate ventures. Missouri has its own regulations and filing requirements for establishing an LLC, so it is vital to research and complies with the specific rules and guidelines in the desired state of operation.

Hiring the Best LLC Services in Missouri is beneficial if you plan to create an LLC for your rental property business. They will keep you at ease and will help you with the process of making one.

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It is suggested that you speak with a legal professional before you begin setting up a rental prorperty LLC. They’ll understand what’s best for you and your future company. To safeguard your personal assets from business debts, you can always start an LLC in Missouri.

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How to Create a Rental Property LLC in Missouri

To create a rental property LLC in Missouri, you must follow a few steps that include choosing a name for your LLC, hiring a Registered Agent, filing your Articles of Organization, transferring title to your Missouri LLC, and finally, updating the lease.

Step 1: Choose a Name For Your LLC

Selecting a name for your Missouri rental property LLC is essential to forming. Your business name should be unique, memorable, and reflective of your products or services. There is a complete guide on Missouri Business Name Search for you to have a proper LLC business name. 

In Missouri, your rental property LLC name must:

  • The business name should have the word LLC or L.L.C.
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license. 

In Missouri, if you do not wish to file your LLC right away but want to hold the name that you have decided on, then you can reserve your LLC name for 60 days. You must file a name reservation application with the Missouri Secretary of State to keep the name. 

You can register your business under a different legal name if your preferred name isn’t available.  Once you have chosen a name, you can submit an application for Missouri DBA (doing business as). In this manner, you can choose any name you desire for your business. A DBA allows a company to operate under the name of the person or entity who owns it. If you have decided to file for a DBA, you can file it in three methods, online, by mail, and in person filing.

However, before filing a DBA, you should know that you need to renew your DBA every five years, which costs $7.

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Step 2: Choose a Registered Agent

The next step in forming a rental property LLC is hiring a Registered Agent who accepts legal paperwork for your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Missouri. Forming an LLC and creating a rental property for your LLC will be easier if you have a Registered Agent in Missouri. You can serve as your Registered Agent, or you can appoint a friend, family member or hire the Best Missouri Registered Agent Services.

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Step 3: File Your LLC’s Articles of Organization

The Articles of Organization for a rental property LLC is an important document to start your limited liability company (LLC). You must have a business establishment before you have a proper rental entity in Missouri. Missouri Articles of Organization is a simple document that contains the business name and address and the name and address of the person who received lawsuits on behalf of the organization. In Missouri, the filing fee is $105. 

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Step 4: Transfer Title To Missouri Rental Property LLC

Once you have formed an LLC for your Missouri rental property, transferring the property title to the LLC is crucial. This is an essential step to ensure that the benefits of operating your rental property through an LLC, such as limited liability protection and potential tax advantages, are fully realized.

Here are the key steps involved in transferring the property title to your LLC:

Prepare a Deed

To transfer the property title to your LLC, you must prepare a deed, a legal document conveying ownership of the property. The type of deed required for this transfer may vary depending on Missouri laws and the specific circumstances of your property. Common deeds include warranty deeds, quitclaim deeds, and grant deeds. 

  • If you transfer title through a quitclaim deed, you are passing any interest you might have in the property to your LLC. 
  • If you would like a warranty deed, it includes a guarantee that the title was good and free of any claims or interests by third parties. 

Record the Deed

Once the deed has been prepared, it must be recorded with your state’s appropriate county recorder or land registry office. Recording the deed is essential for completing the transfer of the property title to the Missouri LLC and ensuring that the change in ownership is part of the public record. 

Update Property Insurance

After transferring the property title to your Missouri LLC, you will need to update your property insurance policy to reflect the change in ownership. Contact your insurance provider to inform them of the change and ensure that the LLC is listed as the property owner on the policy. This is crucial for maintaining proper coverage and protecting your investment.

Notify Your Mortgage Lender

If you have a mortgage on the property, it is essential to notify your mortgage lender of the change in ownership. Some lenders may require you to obtain their approval before transferring the property title to an LLC. Additionally, be aware of the “due-on-sale” clause in your mortgage agreement, which the transfer of property ownership may trigger. Sometimes, lenders may enforce this clause and require you to pay off the mortgage immediately. However, this is only sometimes the case, and many lenders may allow you to proceed with the transfer without issue.

Step 5: Update And Amend The Lease

Moreover, as soon as you sort out the kind of deed you want in your rental property LLC in Missouri, you should sign and record the deed to draft and amend your lease. 

A fast and simple solution to minimize your liability for claims about the property is to transfer the property to an LLC in Missouri. But changing the title to your property shouldn’t be your actual plan. Also, speaking with an insurance agent and securing enough liability insurance to pay for any potential claims is important. This ensures that rent payments and other responsibilities are directed to the Missouri LLC rather than you.

Step 6: Getting Permits And Licenses

When you get a rental property LLC in Missouri, it is mandatory to get permits and licenses from the Missouri Secretary of State. Any permits and licenses you obtain for your Missouri rental property LLC must be updated and compliant with the local city/county authority. 

Cost to Form an LLC in Missouri

The cost to form an LLC in Missouri can vary depending on several factors, such as Missouri filing fees, Registered Agent fees, and any additional services you may require. Here’s a breakdown of the typical costs associated with forming an LLC in Missouri:

State Filing Fees

The state filing fee is the primary expense when forming an LLC in Missouri. This fee is paid to the Missouri Secretary of State to process your LLC formation documents, such as the Articles of Organization. The filing fee typically costs $105 (by mail and $50 online), while the LLC annual fee is $7.

Read the Missouri LLC Cost to know more about the specific cost.

Registered Agent Fees

Most states, including Missouri, require an LLC to designate a Registered Agent. A Registered Agent is a person or company responsible for receiving legal and official documents on behalf of the LLC. You can act as your own Registered Agent or hire a Registered Agent. These services typically charge an annual fee, ranging from $50 – $150, depending on the level of service provided.

Operating Agreement

While not always required by state law, creating an Operating Agreement for your Missouri LLC is highly recommended. An Operating Agreement outlines the LLC’s management structure, ownership percentages, and other details. You can draft an Operating Agreement, use an online template, or hire an attorney to create a customized agreement. The cost of an operating agreement can range from minimal (if using a free template) to several hundred dollars or more (if hiring a business attorney).

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Business Licenses and Permits

Depending on your Missouri business activities and location, you may need to obtain Missouri licenses. The costs for these licenses and permits will vary depending on the license type, the issuing authority, and the location of your Missouri business. However, in Missouri, the business license fee ranges from $50 – $300.

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Annual Report and Taxes

Some states, including Missouri, may require LLCs to pay Annual fees or taxes. These fees include Annual Report filing fees, franchise taxes, or other state-specific fees. In Missouri, here are the following costs.

  • Annual Report Filing Fee- $7
  • Franchise Tax Fee- No franchise tax
  • Sales Tax Fee- Bond Required

Optional Services

You may utilize additional optional services when forming an LLC, such as hiring a professional formation service, obtaining an Employer Identification Number (EIN) in Missouri, or registering your business name as a trademark. These services range from free (obtaining an EIN) to several hundred dollars.

Benefits of Creating a Rental Property LLC

Creating a Limited Liability Company (LLC) for rental properties in Missouri offers several benefits. Missouri LLC is a business structure that combines a partnership’s flexibility with a corporation’s limited liability protection. Here are some key advantages of establishing an LLC for your rental properties:

Limited Liability Protection

One of the main benefits of creating an LLC for rental properties is its limited liability protection. As an LLC owner, your assets are protected from the debts and liabilities of the rental property. Should any legal issues arise, such as a tenant lawsuit or property damage claim, your assets, such as your home, personal bank accounts, and other investments, are generally not at risk.

Tax Advantages

LLC offers potential tax benefits for rental property owners in Missouri. By default, an LLC is considered a pass-through entity, meaning the profits and losses from the rental properties pass through to the owners’ tax returns. This avoids the double taxation that occurs with corporations. Additionally, rental property owners may take advantage of tax deductions for expenses related to the property, such as mortgage interest, property taxes, maintenance, and repairs.

Easier Management

Managing rental properties through an LLC can simplify ownership and make it easier to manage multiple properties. You can streamline bookkeeping, tax reporting, and other administrative tasks with an LLC. If you own multiple rental properties, you can consolidate them by creating a Single-Member LLC in Missouri.

Professional Image

Operating your rental properties through an LLC can enhance your professional image and credibility with tenants, lenders, and other business partners. It demonstrates that you are serious about your real estate investments and are committed to maintaining high standards of professionalism and business practices.

Flexibility in Ownership and Management

Missouri LLC offers flexibility in ownership and management structures. You can have multiple members in your Missouri LLC, allowing you to bring in partners or investors. Additionally, an LLC can have different classes of membership interests, enabling you to allocate profits and losses in various ways among the members.

Estate Planning Benefits

Missouri LLC can provide estate planning benefits for rental property owners in Missouri. Transferring rental properties into an LLC allows you to pass ownership interests to your heirs without probate easily. This can simplify transferring assets and minimize potential disputes among beneficiaries.

FAQs

What is a rental property LLC in Missouri?
A rental property LLC in Missouri is a limited liability company that owns and manages rental properties in the Missouri area.
Why would I want to create a rental property LLC in Missouri?
Creating a rental property LLC in Missouri offers you personal liability protection by separating your personal assets from your rental property assets in case of any legal issues.
What is required to create a rental property LLC in Missouri?
In Missouri, you will need to file Articles of Organization with the Secretary of State and fulfill state tax obligations in order to create an LLC for rental property.
How much does it cost to create a rental property LLC in Missouri?
The filing fee for an LLC in Missouri is $50, as of 2021.
Can a non-resident apply to create a rental property LLC in Missouri?
Yes, anyone can apply to create a rental property LLC in Missouri, regardless of their residency, but a Registered Agent must be appointed.
What advantage does a Registered Agent offer when creating a rental property LLC in Missouri?
A Registered Agent is required to receive important legal documents and tax deadlines associated with the LLC.
Is there a limit to how many rental property LLCs one can create in Missouri?
No, there is no legal limit to how many rental property LLCs one can create in Missouri.
Is an attorney needed to create a rental property LLC in Missouri?
No, an attorney is not required to form a rental property LLC in Missouri, but it is recommended to ensure the process is done correctly.
Can an existing LLC be converted to a rental property LLC in Missouri?
Yes, it is possible to convert an existing LLC to a rental property LLC in Missouri.
Do I need insurance for my rental property LLC in Missouri?
It is important to have adequate insurance coverage for your rental property LLC in Missouri, such as liability insurance and landlord insurance.
Can a rental property LLC in Missouri rent out all types of properties?
Yes, a rental property LLC in Missouri can rent out any type of property, such as apartments, houses, and commercial spaces.
Do I need to hire a property manager for my rental property LLC in Missouri?
It is not required to hire a property manager for your rental property LLC in Missouri, but if you don’t have the time, hiring a property manager may be a wise decision.
Are there any taxes that come with creating a rental property LLC in Missouri?
Yes, you will need to fulfill state tax obligations in order to create and maintain your rental property LLC in Missouri.
Can a rental property LLC in Missouri operate in multiple states?
Yes, a rental property LLC in Missouri can operate in multiple states, but will likely need to establish foreign entity registration in each state.
How can LLC profits from my rental property be distributed in Missouri?
The profits generated by your rental property LLC can be distributed based on the ownership percentage of each LLC member in Missouri.
Can I deduct rental property LLC expenses from my personal taxes in Missouri?
Yes, you can deduct rental property LLC expenses on your personal income tax return in Missouri.
Is there a deadline for filing Articles of Organization for a rental property LLC in Missouri?
No, there is no deadline for filing Articles of Organization for a rental property LLC in Missouri.
Are there any other ways to protect my rental property besides creating an LLC in Missouri?
Other options for protecting your rental property in Missouri include setting up a living trust or having proper insurance coverage.
What are the benefits of organizing my rental properties into an LLC in Missouri?
Benefits of organizing your rental properties into an LLC in Missouri include asset protection, Pass-thru taxation and stronger chances of getting Less expensive financing.
Do I need separate LLCs for each rental property in Missouri?
No, you do not need a separate LLC for each rental property in Missouri. You can own multiple properties under one LLC.
Can my rental property LLC in Missouri act as my personal residence and be protected?
No, your rental property LLC in Missouri cannot act as your personal residence and be protected. It has to work solely as an LLC of it’s own rental property business.
Do I need an EIN for my rental property LLC in Missouri?
Yes, you will need an EIN in order to file taxes and conduct business as a rental property LLC in Missouri.
How long does it take to set up a rental property LLC in Missouri?
It normally takes up to 14 Business Day to form a rental property LLC in Missouri, or it can be expedited at an additional cost.
Can I change the name of my rental property LLC in Missouri after it is formed?
Yes, you are allowed to change the name of your rental property LLC in Missouri through filing articles of amendment with the Secretary of State and additional cost.
Do I need to renew my rental property LLC in Missouri every year?
​You will need to file an LLC Annual Report each year in Missouri which means renting operations are still live and financially stable.
What do I need to ensure continual protection after LLC formation in Missouri?
You need to submit annual reports, observing local and state Tax compliance, consent action and/or minutes, protecting company agreement signed investing contribution of initial members that come after LLC formation.
How do I dissolve my rental property LLC in Missouri?
File Form-BUS/REG with the Secretary of State to dissolve a rental property LLC in Missouri, and make sure there’s full agreement among members.
What happens to rental Deposits if LLC Dissolves in Missouri?
If a rental property LLC dissolves in Missouri any rental deposits returned to renter will be exempt from taxes otherwise typically lost revenue from deposit stays with debt and other liabilities from LLC enveloped back to members.
Is Missouri a good state for rental investments?
Yes, Missouri is a good state for rental investments because of relatively low cost of living.
How to avoid/minimize taxes after LLC creation and implementation in Missouri?
Consult with Tax Advisor to minimize loans, automate rent payments and timely expenses/agreements and always confirm good record/documentation preservation.

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Conclusion

Creating a rental property in Missouri requires careful planning, research, and execution. By following these steps, you can create a successful rental property that generates passive income and provides valuable housing to tenants. Remain diligent and proactive in managing your property to ensure long-term success in the competitive rental market. Ensure the details and records are accurate and precise with the previous filing documentation. And if you have any questions, share them in the comment section below.

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