Creating a Rental Property LLC in Arkansas

Benefits of creating LLCs for rental properties in Arkansas

First and foremost, several benefits come with setting up your rental property as an LLC. Some of these benefits include: 

• Personal liability protection to shield your personal assets from business debts and claims
• Pass-through taxation to avoid double tax payment
• Separation of business and personal property 

Additionally, real estate investment property owners in Arkansas might consider forming a series LLC to further protect the business’s assets. Through a series LLC, you can essentially create one overarching umbrella LLC with multiple “mini” or “series” LLCs underneath it. This can be a great way to obtain limited liability protection for separate rental properties without having to deal with the time and expense of creating a separate legal entity for each one. 

What to know before creating an LLC for a rental property in Arkansas

Before you move forward with creating your rental property LLC in Arkansas, there are a few important things you should know. By understanding these basics, you can better determine whether creating an Arkansas real estate LLC is the right move for you.  

Steps to form an LLC for your Arkansas rental property

The first step in creating your rental property LLC in Arkansas is to set up a legal business entity. Not sure how to get started? Let’s take a quick look at the LLC formation process. 

Step 1: Choose Your LLCs Name and File Your Articles of Organization

First, choose a name for your business. It must comply with state law and cannot be the same as or substantially similar to a name already taken. Once you’ve found the right name, the next step is to file Articles of Organization with the state to officially establish your LLC. 

Step 2: Transfer Property into the Name of the LLC

Next, you’re ready to transfer title to the property into the name of the LLC. This will require recording the deed with the county in which the property is located. If applicable, make sure to also pay any requisite title transfer tax.

If you don’t own the property outright and there’s an existing mortgage on the property, you’ll also need to inform your lender of the transfer into the name of the LLC. In certain situations, the lender may need to adjust paperwork or rework the terms or rates of the loan itself. 

Step 3: Update All Existing Paperwork

Lastly, make sure to update any existing leases or rental agreements to reflect the ownership change and update your current tenants/renters accordingly. Although you may be the owner of the LLC, it’s important to make sure that all paperwork moving forward expressly lists the entity as the owner, rather than you in your individual capacity.

Who should form an Arkansas LLC for their rental property?

Although setting up an LLC is not required, failure to do so can expose you to legal liability, potentially putting your personal assets at risk. 

So, exactly who might benefit from forming an LLC for a rental property in Arkansas? In short, forming an Arkansas LLC is a good idea for anyone looking to establish or continue leasing a rental property. This is true for properties that are listed for both vacation and residential purposes. 

While you can technically set up your Arkansas real estate LLC at any time, sooner is generally better. If you create the LLC first, then you can buy future properties under the LLC’s ownership and have the deed drafted from the outset in the LLC’s name. This can allow you to avoid extra work later on. 

How We Can Help

If you’re thinking about starting a rental property company in Arkansas or need to make sure that you comply with state regulations, we are ready to lend a hand. Whatever your situation, we can help help your sort out your rental property LLC concerns. Not only can we form your LLC, our Worry-Free Compliance Service can help keep your business legally compliant and our guide to writing a business plan can also help you stay on track with your business goals.