How to set up an LLC for your rental property in New York

If you’re a landlord or real estate investor in New York, you’ve probably heard about the benefits of creating an LLC for your rental property. But how exactly do you set one up? What are the costs, the timelines, and the paperwork involved? And importantly, what does an LLC protect you from as a landlord in New York?

This guide will walk you through everything you need to know about how to set up an LLC for a rental property in New York, with a clear focus on the state-specific details that matter most.

Why landlords in New York consider an LLC for rental property

Owning rental property comes with risks, from tenant disputes to property damage. Many landlords in New York consider forming a Limited Liability Company (LLC) to potentially protect their personal assets and manage their investments more efficiently.

An LLC may help separate your personal finances from your rental business and could provide some protection in certain legal situations. But it’s important to understand both what an LLC can protect you from—and what it can’t—before diving in.

What an LLC is and what it can (and cannot) protect you from as a landlord

An LLC is a business structure that combines the liability protection of a corporation with the tax flexibility of a partnership. For landlords, the main appeal is that it provides a legal barrier between your rental property and your personal assets.

An LLC generally aims to protect you from:

• Personal liability if a tenant or visitor sues over injuries or property damage related to the rental.
• Personal liability for debts and obligations of the rental business.
• Personal exposure if the rental property faces foreclosure or creditor claims.

However, an LLC does not protect you from everything:

• You’re still liable if you personally guarantee loans or mortgages.
• If you’re negligent or break laws, you can be held personally responsible.
• An LLC doesn’t replace the need for proper insurance, including landlord insurance.

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

Setting up an LLC in New York involves several steps. Let’s break down the process to help you understand the typical steps involved.

1. Choose a name for your LLC

Your LLC’s name must be unique in New York and include “Limited Liability Company” or abbreviations like “LLC” or “L.L.C.” You can check name availability on the New York Department of State website.

2. Designate a registered agent

Your LLC needs a registered agent with a physical address in New York who can receive legal papers on behalf of the LLC. You can be your own agent or hire a service.

3. File your articles of organization

The articles of organization are the official documents that create your LLC. They include your LLC’s name, registered agent, and other basic info. You file them with the New York Department of State.

You can file online or by mail. Filing online is usually faster. More on what are articles of organization and how to file articles of organization below.

4. Publish your LLC formation notice

New York requires new LLCs to publish a notice in two newspapers (one daily, one weekly) in the county where the LLC is located, for six consecutive weeks. After publication, you get affidavits of publication from the newspapers and file a Certificate of Publication with the state.

This publication requirement is unique and can add to the setup time and cost, so plan accordingly.

5. Create an operating agreement

While not required to file, New York requires LLCs to adopt a written operating agreement within 90 days of formation. This document outlines ownership, management, and operational rules.

6. Obtain an EIN

An EIN (Employer Identification Number) is issued by the IRS and is needed for tax purposes, opening bank accounts, and hiring employees (if any).

7. Meet any additional local requirements

Depending on your location and rental type, you may need permits, licenses, or registrations.

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

Knowing how much it costs to set up an LLC is crucial when planning your rental property investment.

• The LLC filing fee for the articles of organization is $200.
• The publication requirement can cost between $300 and $1,200, depending on local newspaper rates.
• The Certificate of Publication filing fee is $50.
• New York does not require an annual report fee, but some counties may have local filing fees. You will, however, have to pay a $9 fee biannually (every two years), according to LLC University.
• If you hire a registered agent service or a lawyer, those costs add on top.

So, initial setup costs typically range from $550 to $1,500 or more, largely depending on publication fees.

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

You might wonder how long it takes to set up an LLC in New York, especially if you want to move quickly.

• Online filing of articles of organization typically takes 24 to 72 hours for processing.
• Mail filings take longer, usually 7 to 10 business days.
• The six-week newspaper publication adds significant time before your LLC is fully compliant.

So realistically, expect about 1.5 to 2 months from filing to complete compliance due to the publication requirement.

Articles of organization: what they are and how to file them

Articles of organization are the documents that officially create your LLC. They include basic info like:

• LLC name
• County where the LLC office is located
• Registered agent’s name and address
• Management structure (member-managed or manager-managed)

To file articles of organization in New York, you can:

• File online directly through the New York Department of State website.
• Mail a paper form with a $200 fee to the Department of State’s Division of Corporations.

Keep a copy for your records once approved.

Do I need a lawyer to start an LLC in New York?

Many landlords ask, do I need a lawyer to start an LLC? The New York LLC formation process is generally straightforward, and many landlords choose to DIY it, but you may want to consult a lawyer if you have complex needs.

A lawyer can be helpful if:

• You want custom operating agreements.
• You have multiple properties or complex ownership structures.
• You want advice on tax implications or asset protection strategies.

If you decide to go it alone, be sure to use official resources and carefully follow New York’s LLC requirements, and consider consulting a qualified attorney or CPA for guidance.

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

An EIN (Employer Identification Number) is like a Social Security number for your LLC. It’s required to open bank accounts, file taxes, and more.

Getting an EIN is simple and free through the IRS. You can apply online at the IRS EIN website, or submit Form SS-4 by mail or fax.

You’ll need your LLC’s formation details handy, and the EIN is usually issued immediately if applying online.

Do LLCs need annual reports and other ongoing compliance in New York?

Unlike many states, New York does not require LLCs to file annual reports or pay annual fees with the Department of State. That’s a nice relief for landlords.

However, you do need to:

• File a Certificate of Publication within 120 days of formation.
• Maintain a current registered agent and address.
• Keep your operating agreement up to date.
• File taxes as required by federal and state law.

Check your local county and city requirements, as they may have additional filings or fees.

S corp vs LLC for landlords: high-level pros and cons

You might have heard about choosing between an S corporation and an LLC for rental property ownership. Here's a quick overview:

• LLCs are generally simpler to set up and maintain. They offer flexible management and pass-through taxation by default.
• S corporations can offer tax advantages for certain types of income but involve stricter rules, more paperwork, and potential limits on ownership.

For many landlords, an LLC may be a preferred structure for holding rental properties because of its simplicity and liability protection.

If you want to explore more, consider chatting with a tax professional to see what fits your situation best.

LLC vs umbrella insurance for rental property risk management

Forming an LLC isn’t your only line of defense. Many landlords ask about LLC vs umbrella insurance for protecting their rental property investments.

An LLC provides legal separation and liability protection, but it doesn’t cover all risks. A good landlord insurance policy, plus an umbrella insurance policy, can cover things like:

• Property damage
• Liability claims beyond your standard policy limits
• Lawsuits related to tenant injuries

For New York landlords, combining both an LLC and solid insurance is often considered a prudent approach. Learn more about the differences and how they work together in this LLC vs umbrella insurance article.

And of course, make sure you have the right landlord insurance in New York to match your risk profile.

When an LLC makes sense for landlords in New York and when it may not

Should you form an LLC for every rental property? It depends.

An LLC may make sense if:

• You want to protect your personal assets.
• You have multiple properties and want to separate liabilities.
• You’re concerned about lawsuits or creditor claims.
• You want flexible management and ownership options.

An LLC might not be necessary if:

• You own a single property with minimal risk.
• You’re comfortable with your existing insurance coverage.
• The publication requirement and costs outweigh the benefits for your scale.

Remember, forming an LLC is just one part of a broader risk management strategy.

Next steps: review your LLC and insurance setup

If you’re thinking about how to set up an LLC for a rental property in New York, take the time to plan carefully and understand the state-specific steps and costs.

Review your insurance policies to cover gaps that an LLC won’t protect against. Setting up an LLC may provide peace of mind and a stronger foundation for your rental business in New York. Take it step by step, and don’t hesitate to consult professionals for tailored advice.‍

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Please consult a qualified attorney or tax advisor for advice specific to your situation.