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

If you’re a landlord or real estate investor in Vermont, you’ve probably heard about the benefits of forming an LLC for your rental properties. An LLC, or limited liability company, can offer some important protections and flexibility when it comes to owning rental real estate. But how do you actually set up an LLC for a rental property in Vermont? What does the process look like, how much does it cost, and what ongoing requirements should you be aware of?

In this guide, we'll walk through everything Vermont landlords need to know about forming an LLC, from the basics to the details unique to Vermont. We’ll also touch on important topics like LLC filing fees, annual reports, whether you need a lawyer, and how an LLC compares to other options like S corps or umbrella insurance.

If you’re considering whether to form a separate entity for your rentals, this article will help you get started on the right foot.

Why landlords in Vermont consider an LLC for their rental property

Owning rental properties in Vermont comes with certain risks — from tenant disputes to property damage and liability claims. An LLC may help separate your personal assets from your rental business, potentially providing some protection for your home, savings, and other investments if something goes wrong.

That said, it’s not a magic shield. An LLC provides limited liability protection, but it doesn’t protect against all risks — especially if you personally guarantee loans or engage in negligence. That’s why it’s also important to combine an LLC with proper insurance coverage.

Many Vermont landlords form LLCs with the goal of:

• Limiting personal liability  
• Simplifying transferring ownership interests  
• Potentially improving tax flexibility  
• Establishing a clear business structure for their rentals  

You can read more about our guide on LLCs for rental properties to understand if it fits your situation.

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

An LLC is a business entity that limits your personal liability for debts and legal claims related to the business. For landlords, this generally means that if a tenant sues your rental property LLC, they typically cannot go after your personal bank accounts or home, provided certain conditions are met.

What does LLC protect you from? It can shield your personal assets from lawsuits, unpaid debts, and other liabilities tied to your rental business — as long as you keep your LLC’s finances separate from your personal finances.

What it doesn’t protect you from includes:

• Personal negligence or illegal acts  
• Guarantees you personally signed  
• Commingling funds or poor record keeping  
• Certain tax obligations  

So, think of an LLC as a layer of protection that works best when paired with good business practices and insurance.

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

Here is a general overview of the steps involved in forming an LLC in Vermont. You may want to consult a professional to ensure compliance with your specific situation.

1. Choose a unique LLC name  

The name must include “Limited Liability Company” or abbreviations like “LLC.” It can’t be the same as another Vermont business name. You can check name availability on the Vermont Secretary of State website.‍

2. Designate a registered agent  

This is the person or business authorized to receive legal documents for your LLC in Vermont. The agent must have a Vermont street address (no PO boxes).

3. Prepare and file articles of organization  

This is the official document that creates your LLC. We’ll explain this more below.

4. Create an operating agreement (optional but recommended)  

This internal document outlines how your LLC will be managed and how profits are shared. Vermont does not require it, but it’s a good idea for clarity.

5. Apply for an EIN from the IRS  

This is your LLC’s federal tax ID number, needed for opening bank accounts and filing taxes.

6. Register for Vermont state taxes if applicable  

Depending on your rental activities, you might need to register for state taxes.

7. Comply with any local permits or licenses  

Check with your city or town to see if additional permits are required.

How much it costs to set up an LLC in Vermont

One of the first questions landlords ask is, “how much does it cost to set up an LLC?”

• LLC filing fee: Vermont charges a $155 filing fee to submit your articles of organization, according to the website LLC University. This fee covers the state’s processing of your LLC formation.
• Annual report fee: Vermont requires LLCs to file an annual report with a $35 fee. This keeps your LLC in good standing.
• Registered agent fees: If you hire a professional registered agent service, expect to pay around $100 to $300 per year.
• Other costs: You might pay for an operating agreement template, EIN application assistance, or legal advice if you choose.

Altogether, expect to spend at least $160 upfront ($125 filing + $35 annual report) plus any optional services.

How long it typically takes to set up an LLC in Vermont

If you file online through the Vermont Secretary of State’s website, you can often get your LLC approved within 1 to 3 business days. Paper filings take longer — typically 5 to 7 days or more.

Expedited processing options might be available for an additional fee if you need your LLC formed quickly.

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

So, what are articles of organization? They’re the official document that tells Vermont you’re creating an LLC. It includes key details like:

• LLC name  
• Registered agent name and address  
• Principal office address  
• Organizer’s name and signature  

In Vermont, you file your articles of organization online or by mail with the Secretary of State’s office. You can find the form and instructions on the Vermont business registration page.

Filing your articles of organization is the main step to legally form your LLC.

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 answer depends on your comfort level and complexity.

For straightforward rental property LLCs in Vermont, many landlords successfully form LLCs themselves using the Secretary of State’s online system. The state’s website is user-friendly and guides you through the process.

However, if you have multiple properties, complex ownership structures, or want customized operating agreements, consulting a lawyer can save headaches down the road.

Just remember, forming an LLC is often the easier part — managing it properly over time is where good advice pays off.

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

An EIN (Employer Identification Number) is like a Social Security number for your LLC. It’s required to open a bank account, pay taxes, and hire employees (if any).

Getting an EIN is free and easy. You can apply directly through the IRS online portal at irs.gov, and you usually get your EIN immediately.

Obtaining an EIN is an important step to help separate your LLC’s finances from your personal accounts, which supports maintaining liability protection.

Do LLCs need annual reports and other ongoing compliance in Vermont?

Yes, Vermont LLCs must file an annual report every year with the Secretary of State. The report updates your LLC’s contact information and other basic details.

• Fee: $35  
• Due date: Annually by April 15th (for most LLCs)  
• Filing: Online filing is available and recommended  

Failing to file your annual report may result in administrative dissolution of your LLC, potentially affecting your LLC’s legal protections.

Additionally, keep good records, maintain a separate bank account, and renew any business licenses or permits as needed.

S corp vs LLC for landlords: a high-level look

You might have heard about S corps as another business structure. How does an S corp compare to an LLC for landlords?

• LLC: Simpler to set up and manage, offers flexible ownership and management structures, defaults to pass-through taxation (income passes to your personal tax return). LLCs can elect to be taxed as an S corp if desired.
• S corp: Offers potential tax benefits on self-employment taxes but comes with stricter rules about ownership, formalities, and payroll requirements.

For many Vermont landlords, an LLC is often considered an easy and flexible choice, but individual circumstances vary. Deciding between an LLC and electing S corp status is a tax question best discussed with your accountant.

LLC vs umbrella insurance for rental property risk management

It’s important to understand that an LLC and umbrella insurance serve different but complementary roles in protecting you.

An LLC provides legal separation between you and your rental’s liabilities. However, it doesn’t cover all risks.

Umbrella insurance adds extra liability coverage beyond your landlord insurance policies, helping cover large claims or lawsuits.

You can learn more about the differences and when you might need one or both in our article on LLC vs umbrella insurance.

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

An LLC often makes sense if you:

• Own multiple rental properties  
• Want to protect personal assets from rental-related liabilities  
• Plan to bring on partners or investors  
• Want a clear business structure for your rentals  

It may not be necessary if you own a single property and prefer simplicity, but keep in mind the risks of personal exposure.

Before you decide, review your insurance coverage carefully. Good landlord insurance in Vermont can also provide critical protection.

Next steps: setting up your Vermont rental property LLC

If you decide to form an LLC for your Vermont rental property, you might start by choosing a name and checking availability on the Vermont Secretary of State’s website. Then prepare your articles of organization and file online with the $125 filing fee.

While you can do this yourself, consider talking to a lawyer or accountant if you want tailored advice.

Don’t forget to get your EIN from the IRS and file your annual reports to keep your LLC in good standing.

Remember, forming an LLC is a great step toward protecting your rental property business, but it’s just one part of smart risk management. Combine it with proper insurance and professional advice to keep your Vermont rentals safe and profitable.