How to set up an LLC for your rental property in North Dakota

If you own or are planning to buy rental property in North Dakota, you might be wondering how to protect yourself and your investments. One popular option among landlords and real estate investors is setting up a limited liability company (LLC). An LLC can help separate your personal assets from your rental business, potentially limiting your personal liability if something goes wrong.

But North Dakota has its own rules and procedures for forming an LLC, so it’s important to understand the specifics before you dive in. This guide outlines common steps to consider when setting up an LLC for a rental property in North Dakota, including the costs, timeline, and ongoing requirements, so you can make an informed decision.

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

An LLC is a business structure that combines elements of a corporation with the simplicity of a partnership. For landlords, the main benefit is liability protection: the LLC is considered a separate legal entity, which means your personal assets (like your home, car, or personal savings) are generally shielded if your rental property faces legal claims.

However, it’s important to remember that an LLC doesn’t provide absolute protection. For example, if you personally guarantee a loan or commit fraud, the LLC won’t shield you. Also, an LLC doesn’t replace the need for proper insurance coverage. Learn more about what an LLC is and what it protects you from.

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

Setting up an LLC in North Dakota is a straightforward process, but it requires careful attention to a few key steps:

1. Choose a name for your LLC. Your LLC’s name must be unique and include “Limited Liability Company,” “LLC,” or “L.L.C.” You can check name availability on the North Dakota Secretary of State website.
2. Designate a registered agent. This person or business is responsible for receiving legal documents on behalf of your LLC. The agent must have a physical address in North Dakota.
3. File articles of organization. This is the official document that creates your LLC. You'll submit it to the Secretary of State along with the required filing fee.
4. Create an operating agreement. While not mandatory in North Dakota, this internal document outlines the ownership and management structure of your LLC.
5. Get an EIN from the IRS. An Employer Identification Number is generally necessary for tax purposes and opening a business bank account.
6. Register for any applicable state taxes. Depending on your rental activities, you might need to register with the North Dakota Tax Commissioner.

These are common steps to help establish your LLC and prepare it to hold your rental property, but individual circumstances may vary.

How much it costs to set up an LLC in North Dakota

One of the first questions landlords ask is, “how much does it cost to set up an LLC?” In North Dakota, the initial LLC filing fee is $135 if you file online or $140 if you file by mail. That’s paid when you submit your articles of organization.

After that, North Dakota requires LLCs to file an annual report each year with a $50 fee. This report keeps your business information up to date with the state.

You might also want to budget for additional costs like creating an operating agreement, hiring a registered agent service if you don’t have a North Dakota address, and any professional help (lawyer, accountant) you choose to engage.

How long it typically takes to set up an LLC in North Dakota

Wondering “how long does it take to set up an LLC” here? North Dakota’s Secretary of State usually processes online filings within 1 to 3 business days. Paper filings typically take a bit longer, around 5 to 7 business days. If you need expedited service, North Dakota offers faster processing for an extra fee.

It’s a relatively quick turnaround compared to some other states, so you may be able to get your LLC up and running soon after you decide to form it.

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

Articles of organization are the foundational documents that officially create your LLC. In North Dakota, these include your LLC’s name, registered agent information, mailing address, and whether the LLC will be managed by members or managers.

To file articles of organization, you can:

• Submit online through the North Dakota Secretary of State’s business portal.
• Mail a completed form to the Secretary of State’s office.

Along with the filing, you’ll pay the $135 fee (online) or $140 (mail). Once accepted, your LLC legally exists in North Dakota.

Do you need a lawyer to start an LLC, or can landlords DIY the process?

Many landlords wonder, “do I need a lawyer to start an LLC?” The good news is you don’t necessarily need one. North Dakota offers a fairly straightforward online process that lets you handle most of the setup yourself.

That said, if you’re unfamiliar with business structures, have multiple owners, or want to make sure your operating agreement is solid, consulting a lawyer can be a smart move. A professional can also help you navigate tax implications or complex ownership scenarios.

If you’re comfortable with paperwork and want to save on costs, you may want to consider DIY formation, but consulting a lawyer can be beneficial.

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

Once your LLC is formed, you’ll likely need an Employer Identification Number (EIN) from the IRS. This acts like a Social Security number for your business and is essential for tax reporting and opening a bank account.

Getting an EIN is generally free and can be done online, though processing times may vary. You can apply online at the IRS website. You’ll just need your LLC’s legal name and formation details.

Having an EIN helps keep your rental income and expenses separate from your personal taxes.

Do LLCs need annual reports and other ongoing compliance in North Dakota

Yes, LLCs formed in North Dakota must file an annual report each year with the Secretary of State. The report updates the state on your LLC’s contact information, registered agent, and other key details.

The annual report fee is $50, and it’s due by November 15 each year. Failing to file on time may result in penalties or administrative dissolution; you should consult official sources or professionals for guidance.

Beyond annual reports, you should also keep good records, pay any required state taxes, and maintain your registered agent. Staying on top of these ongoing requirements helps keep your LLC in good standing.

S corp vs LLC for landlords

Some landlords consider whether to set up an LLC or elect to be taxed as an S corporation. Here’s a quick overview:

• LLC: Provides liability protection and flexible management. By default, rental income passes through to your personal tax return, avoiding double taxation.
• S corp: Also offers liability protection but has stricter rules on ownership and requires payroll if you pay yourself wages. It can sometimes reduce self-employment taxes but adds complexity.

A standard LLC may be simpler for many landlords, but it’s important to consult a tax professional to determine what fits your needs. Some investors may benefit from the potential tax advantages of an S corp election — it’s worth consulting a tax professional to see what makes sense for your situation.

LLC vs umbrella insurance for rental property risk management

Liability protection is a top concern for landlords, so you might ask: what’s better, an LLC or umbrella insurance? The truth is, they serve different but complementary roles.

An LLC helps shield your personal assets by creating a legal barrier between you and your rental property’s liabilities. But it doesn’t cover everything, especially if you’re sued personally or if the LLC’s assets aren’t enough.

Umbrella insurance provides an extra layer of liability coverage above your landlord insurance policy limits, protecting you from large claims. You can read more about the differences and how they work together in this article on LLC vs umbrella insurance.

When an LLC makes sense for landlords in North Dakota and when it may not

An LLC can be a great choice if:

• You want to protect your personal assets from rental property lawsuits.
• You plan to own multiple properties and want to keep them under one or more LLCs.
• You want flexibility in managing ownership and profit distribution.

However, an LLC might not make sense if:

• You have only one property and limited liability concerns.
• You’re okay with personal liability risks and want to avoid formation costs and paperwork.
• You plan to hold the property long-term and don’t anticipate significant liability exposure.

If you’re unsure, consider your risk tolerance, the value of your assets, and your investment goals. Talking to a local attorney or insurance agent can help you decide.

Wrapping up: protect your rental investments in North Dakota

Setting up an LLC for your rental property in North Dakota can offer important liability protection and help organize your real estate business. The process is relatively simple, with clear steps, reasonable fees, and fast turnaround times.

Just remember that an LLC isn’t a silver bullet—it’s one part of your overall risk management. Make sure you have the right insurance coverage, including landlord insurance in North Dakota, and keep up with your annual report filings to stay compliant.