How to set up an LLC for your rental property in Michigan

If you’re a landlord or real estate investor in Michigan, you may have heard that forming an LLC (limited liability company) can be a useful option for your rental property. But how exactly do you set up an LLC for a rental property in Michigan? What are the costs, the steps, and the benefits? And is an LLC really right for your rental business?

In this article, we’ll walk through everything you need to know about forming an LLC in Michigan specifically for your rental property. We’ll cover the state’s unique filing requirements, costs, timelines, and ongoing rules, plus some tips on LLCs vs other options for landlords. By the end, you’ll have a clearer picture of how to get started with an LLC and whether it might be the best choice for you.

What is an LLC and what does it protect you from as a landlord?

An LLC, or limited liability company, is a type of business structure that combines some of the benefits of a corporation with the flexibility of a partnership. For landlords, LLCs are popular because they can help separate your personal assets from your rental property business. 

What does LLC protect you from? Generally, an LLC is designed to separate personal assets like your home, car, and savings from business liabilities if your rental property faces lawsuits or debts. For example, if a tenant sues you over an injury on your property, your personal finances are often shielded because the LLC is the legal owner of the property. However, keep in mind that this protection isn’t absolute. If you personally guarantee a loan or commit fraud, you could still be on the hook.

An LLC doesn’t protect you from all risks either—things like property damage or liability claims should be covered through insurance. Many landlords find that combining an LLC with the right policies is a solid risk-management approach. If you want to know more about insurance options for Michigan landlords, check out our guide on landlord insurance in Michigan, and consider consulting an insurance professional to understand your coverage needs.

Step-by-step: how to set up an LLC for a rental property in Michigan

Now let’s get practical. Here’s how to set up an LLC for your rental property in Michigan:

1. Pick a name for your LLC

Your LLC name must be unique and include “Limited Liability Company” or abbreviations like “LLC” or “L.L.C.” It can’t be misleading or the same as another registered business in Michigan. You can check name availability on the Michigan Department of Licensing and Regulatory Affairs (LARA) website.

2. Designate a registered agent

Michigan requires every LLC to have a registered agent with a physical address in the state. This agent receives official documents and legal notices on behalf of your LLC. You can be your own agent or hire a professional service.

3. File articles of organization

The key document to form your LLC is called the articles of organization. This paperwork officially registers your LLC with the state. You’ll provide details like the LLC name, registered agent, and whether the LLC will be managed by members or managers.

You can file your articles of organization online or by mail through Michigan’s LARA Corporations Division. The process is generally straightforward, but individual circumstances may vary. We’ll cover the next steps in more detail.

4. Create an operating agreement (optional but recommended)

Michigan doesn’t require an operating agreement, but many find it helpful to have one. This internal document outlines how your LLC will operate, member roles, and profit sharing. It helps prevent misunderstandings if you have partners or plan to add investors.

5. Get an EIN (employer identification number)

Most LLCs need an EIN from the IRS, even if you don’t have employees. It’s used for tax purposes and opening business bank accounts. You can apply for an EIN online for free on the IRS website.

6. Register for state taxes (if applicable)

Depending on your rental activities, you may need to register for Michigan state taxes or local business licenses. For most residential landlords, this step is minimal, but commercial properties or other income might require additional steps.

7. Open a business bank account

Many experts recommend keeping your rental income and expenses separate from personal finances by opening a dedicated bank account in your LLC’s name. This can help maintain liability protection and simplify accounting.

How much does it cost to set up an LLC in Michigan?

​According to LLC University, the state filing fee is $50, and the ongoing annual fee is $25.

Here is a full breakdown of the main fees you’ll encounter:

• LLC filing fee: Michigan charges a $50 fee to file your articles of organization, which establishes your LLC officially with the state. This fee is affordable compared to many other states.
• Annual report fee: Michigan requires LLCs to file an annual statement each year by February 15, with a $25 fee. This keeps your LLC in good standing and updates the state on your business.
• Registered agent fees: If you hire a professional registered agent, expect to pay $100-$300 per year, depending on the service.
• Optional fees: You might also pay for a certified copy of your articles, a business license, or an operating agreement template if you use legal services.

Overall, setting up an LLC in Michigan is relatively inexpensive, especially compared to some states with much higher filing fees.

How long does it take to set up an LLC in Michigan?

How long does it take to set up an LLC? In Michigan, if you file online, the Secretary of State typically processes your articles of organization within 1-3 business days. Paper filings take a bit longer, usually 7-10 business days.

Once approved, your LLC officially exists and you can move forward with opening bank accounts and managing your rental property under the LLC’s name.

What are articles of organization and how to file them in Michigan?

Articles of organization are the official documents you file with Michigan’s Department of Licensing and Regulatory Affairs to create your LLC. They include:

• The LLC’s name  
• The registered agent’s name and address  
• Whether your LLC is member-managed or manager-managed  
• The purpose of your LLC (often a general statement like “to engage in any lawful business”)  

To file articles of organization in Michigan, you can:

• Submit online via the LARA Corporations Online Filing System, which is the fastest way  
• Mail a completed form to the Corporations Division with the $50 filing fee

Make sure to keep a copy of your filed articles for your records.

Do I need a lawyer to start an LLC in Michigan?

Many landlords wonder, do I need a lawyer to start an LLC? The good news is you don’t have to hire a lawyer to form an LLC in Michigan. The state’s process is generally straightforward, and you can handle name searches, filings, and EIN applications on your own.

That said, if you have multiple partners, complex ownership structures, or want to draft a detailed operating agreement, consulting a lawyer can be helpful. A legal professional can help you avoid pitfalls and tailor your LLC to your unique investment goals.

For many landlords, though, DIY LLC formation combined with good research is enough to get started confidently.

How to get an EIN for an LLC that owns rental property in Michigan

An EIN, or employer identification number, is like a Social Security number for your LLC. Even if you don’t have employees, the IRS generally requires an EIN for tax reporting, opening bank accounts, and handling rental income properly.

To get an EIN for your LLC:

• Go to the IRS EIN application page  
• Fill out the online form with your LLC’s information  
• Receive your EIN instantly upon completion

There’s no cost to get an EIN, and it’s a necessary step once your LLC is formed.

Do LLCs need annual reports and ongoing compliance in Michigan?

Yes, Michigan LLCs must file an annual statement every year by February 15. This keeps your LLC active and in good standing with the state.

The annual report is a simple form that updates your business contact info, registered agent, and confirms your LLC is still operating. The filing fee is $25.

Missing this deadline may result in your LLC being revoked or dissolved, which might affect liability protections.

Besides the annual report, keep good records, maintain your registered agent, and pay any applicable state taxes. Staying on top of these compliance duties helps protect your LLC status.

S corp vs LLC for landlords: what’s the difference?

If you’re exploring business structures, you might have heard about S corps as well. Here’s a quick comparison of S corp vs LLC for landlords in Michigan:

• LLCs are generally simpler to set up and maintain. They offer flexible management and fewer formalities. Profits and losses pass through to members’ personal taxes by default.
• S corporations are a tax election that LLCs or corporations can make. They may offer some tax advantages for active businesses but come with stricter rules, such as limits on ownership and more paperwork.

For rental properties, some landlords find the simplicity and flexibility of an LLC appealing. If you’re considering an S corp election for your rental business, be sure to consult a tax professional to understand the pros and cons for your specific situation.

LLC vs umbrella insurance: what landlords should know

An LLC is intended to provide liability protection by separating personal assets from your rental property business, but it does not replace insurance.

You’ll want to consider both an LLC and an umbrella insurance policy to cover risks effectively. An umbrella policy extends your liability coverage beyond your standard landlord insurance limits, providing extra protection if a big claim arises.

Wondering which approach to prioritize or how these tools work together? Our article on LLC vs umbrella insurance explains the differences and how to combine them for stronger protection.

When should landlords use an LLC in Michigan, and when might it not make sense?

LLCs are a popular choice for Michigan landlords because they may help protect personal assets, add credibility with lenders, and provide flexible management options.

Here are some situations where an LLC might make sense:

• You own multiple rental properties and want to separate liabilities  
• You want to simplify transferring or selling your rental business  
• You want to build a formal business structure for partnerships or investors  

However, an LLC isn’t always necessary or beneficial. For example:

• If you have a single rental home and low risk exposure, the costs and paperwork may outweigh the benefits  
• If you plan to live in the property or use it personally, an LLC may complicate taxes  
• If you want to avoid separate bank accounts or filings  

Ultimately, the decision depends on your investment goals, risk tolerance, and plans for growth. For a broader look at whether you should landlords use an LLC, check out our detailed guide here: should landlords use an LLC.

Next steps: protect your Michigan rental property the right way

Forming an LLC for your rental property in Michigan is one option landlords consider for liability protection and business flexibility. Many find it affordable and relatively quick to set up, especially when handling filings independently.

But remember, an LLC isn’t a silver bullet. You’ll also need good insurance coverage tailored to Michigan landlords, like policies against property damage, liability claims, and loss of rental income. To explore your options, take a look at our landlord insurance in Michigan guide, and consider consulting an insurance professional.

And don’t forget to think about your risk management strategy: combining an LLC with umbrella insurance can give you powerful layers of protection. Learn more about the differences and benefits in our article on LLC vs umbrella insurance.

Finally, while this guide covers the basics, always consider consulting a qualified attorney or tax advisor familiar with Michigan laws to make decisions tailored to your unique situation.

Setting up your LLC the right way now can pay off with peace of mind and protection for your rental investments down the road. Good luck!