If you own rental property in Arkansas, you may be wondering whether it's worth it to form an LLC (Limited Liability Company) to manage your properties. An LLC can help protect you from liability if someone is injured on your property or if you are sued by a tenant. Here's everything you need to know to create a rental property LLC in Arkansas.
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Step 1: Choose Your Business Name
The first step in creating an LLC is to choose a name for your business. Your business name cannot be the same as an existing Arkansas LLC or corporation, and must include the term "Limited Liability Company" or "LLC."
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You can check the availability of your proposed business name by searching the Arkansas Secretary of State’s business name database online. Once you've chosen a name that's available, you can move on to the next step.
Step 2: Appoint a Registered Agent
As part of the LLC formation process, you must appoint a registered agent. A registered agent is a person or company that agrees to receive legal papers on behalf of your business and forward them to you.
Your registered agent must be a resident of Arkansas or a corporation authorized to do business in Arkansas. You can also appoint yourself or another member of your LLC to be the registered agent.
Step 3: File Your Articles of Organization
To create an LLC in Arkansas, you must file your Articles of Organization with the Arkansas Secretary of State's office. This can be done online or by mail.
The Articles of Organization document must include the following information:
- Your LLC's name
- Your registered agent's name and address
- The name and address of the LLC's organizer (the person who prepares and submits the paperwork)
- Whether the LLC will be managed by the members (owners) or by managers
- A statement that the LLC will be operated for a legal business purpose
Once you have completed and filed your Articles of Organization, you will need to pay a $50 filing fee.
Step 4: Create an Operating Agreement
An operating agreement is a document that outlines how your LLC will be run. Though it's not required by law, having an operating agreement can help make sure everyone is clear on their duties and responsibilities.
Your operating agreement should include the following information:
- How profits and losses will be divided among members
- How decisions will be made
- How new members can join or existing members can leave the LLC
- How the LLC can be dissolved
You should also outline what happens if a member dies or becomes incapacitated.
Step 5: Obtain Your EIN
Every business in the United States is required to obtain an EIN (Employer Identification Number) from the Internal Revenue Service (IRS). Your EIN is the equivalent of a social security number for your business.
You can obtain your EIN from the IRS online for free. Once you have your EIN, you'll need to use it to open a business bank account and pay taxes.
Step 6: Obtain any Required Licenses and Permits
Depending on what kind of rental property you own and where it's located, you may need to obtain certain licenses and permits. For example, if you own a single-family home, you may need to obtain an occupancy permit from your local government.
Make sure you research what permits and licenses you need and obtain them before you rent your property.
Step 7: Keep Good Records
Finally, it's important to keep good records of all your business transactions, including rent payments, expenses, and taxes. You may also want to consider hiring an accountant or using accounting software to make sure everything is recorded accurately.
In conclusion, creating an LLC for your rental property in Arkansas can help protect you from liability and make managing your properties easier. By following the steps outlined above, you can create an LLC in just a few weeks and start reaping the benefits of running your business as a separate legal entity.
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