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

If you’re a landlord or real estate investor in Wisconsin, you’ve probably heard about the benefits of using an LLC for your rental property. An LLC, or limited liability company, can offer protection, flexibility, and sometimes tax advantages. But how do you actually set one up in Wisconsin? How much does it cost, and what are the ongoing requirements? This guide breaks down everything you need to know about how to set up an LLC for a rental property in Wisconsin—step by step and in plain English.

Why landlords in Wisconsin consider an LLC for rental property

Landlords in Wisconsin often turn to LLCs to separate their personal assets from their rental business. This separation may help protect your personal savings and belongings if a tenant sues over something related to the property. That’s a big deal, especially when managing multiple properties or high-value rentals.

Plus, LLCs offer flexibility in management and taxation, making them popular among both new and experienced landlords.

If you’re still debating whether or not you should set one up, we have a guide that lays out the pros and cons of an LLC for your rental property.

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

An LLC typically provides limited liability protection, meaning the LLC itself is generally responsible for debts and lawsuits, not you personally. However, exceptions can apply depending on circumstances; consult a qualified attorney for advice. This protection can be a strong shield against personal financial risk from tenant lawsuits, property damage claims, or other liabilities tied to your rental.

However, an LLC does not protect you from everything. For example, if you personally guarantee a loan or are negligent in property maintenance, you should consider potential exceptions to liability protection and seek legal advice. Also, the LLC doesn’t protect against tax liabilities or criminal acts.

For a deeper dive into what an LLC covers compared to other protections, check out this article comparing LLC and umbrella insurance.

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

1. Choose a name for your LLC

Your LLC’s name must be unique and include “Limited Liability Company” or an abbreviation like “LLC” or “L.L.C.” It can’t be confusingly similar to another registered business in Wisconsin. You can check name availability through the Wisconsin Department of Financial Institutions (DFI) business name search.

2. Designate a registered agent

Wisconsin requires your LLC to have a registered agent with a physical address in the state. This person or company accepts legal documents on behalf of your LLC.

3. File articles of organization

This is the official document that creates your LLC. In Wisconsin, you file your articles of organization with the Department of Financial Institutions. You can do this online or by mail.

4. Create an operating agreement (optional but recommended)

While Wisconsin doesn’t require an operating agreement, it’s wise to draft one. This document outlines ownership, management, and operational rules for your LLC, which can help prevent disputes later.

5. Get an EIN from the IRS

An Employer Identification Number (EIN) is like a Social Security number for your LLC. It’s necessary for tax purposes, opening bank accounts, and hiring employees. You can get an EIN for free directly from the IRS website.

6. Register for state taxes (if needed)

Depending on your rental activity, you might need to register with Wisconsin’s Department of Revenue for sales tax or other tax obligations. Most landlords won’t need this, but it’s something to keep in mind.

How much it costs to set up an LLC in Wisconsin

One of the first questions landlords ask is how much does it cost to set up an LLC in Wisconsin. Here’s a quick breakdown:

• LLC filing fee: $130 when filing online or by mail with the Wisconsin Department of Financial Institutions.
• Annual report fee: $25 per year, due annually by the end of your LLC’s anniversary month.
• Other costs: Optional expenses like legal help, operating agreement templates, or expedited processing might add to your costs.

Compared to many other states, Wisconsin’s fees are fairly reasonable. Keep in mind, too, that the annual report fee is required to keep your LLC in good standing.

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

If you file online, Wisconsin generally processes LLC formation within 2-3 business days. Mail filings usually take longer, about 7-10 business days, depending on the volume of applications.

If you need your LLC set up quickly, online filing is typically the faster option.

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

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

• LLC name
• Registered agent name and address
• Whether the LLC will be managed by members or managers
• Duration of the LLC (usually perpetual)

To file articles of organization in Wisconsin, you can:

• Submit online through the Wisconsin Department of Financial Institutions website.
• Mail a completed paper form to the DFI.

Filing online is generally faster and more convenient.

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

Many landlords successfully set up LLCs on their own, especially with state websites making it easier than ever. While you don’t need a lawyer to start an LLC in Wisconsin, many landlords choose to consult with a lawyer for personalized advice, especially regarding complex issues like structuring, liability protection, or tax implications.

If you feel comfortable with online forms and basic research, you can definitely DIY the formation process.

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

After your LLC is officially formed, you’ll want to get an EIN from the IRS. This number is essential if you want to:

• Open a business bank account
• File taxes as an entity separate from yourself
• Hire employees (if you ever do)

The process is free and can be completed online in minutes at the IRS EIN application page.

Be sure to apply as a business entity; if unsure, consider consulting a tax professional.

Do LLCs need annual reports and other ongoing compliance in Wisconsin

Yes, Wisconsin requires LLCs to file an annual report each year. The report keeps your business information up to date with the state and costs $25. It’s due by the end of the month when your LLC was originally formed.

Failing to file annual reports may result in administrative dissolution, which could have legal consequences; consult an attorney for details.

Other than that, LLCs must keep good records, pay any applicable state taxes, and maintain compliance with local laws.

S corp vs LLC for landlords

You might hear about S corporations as another option for holding rental properties. Here’s a quick comparison:

• LLC: Simpler to set up and maintain, offers flexibility in management and tax treatment, and generally aims to protect personal assets.
• S corp: Can provide tax advantages in some cases, especially for active businesses paying salaries, but involves stricter IRS rules and more formalities.

Many landlords find the LLC structure suitable for rental properties, but individual needs vary; professional advice is recommended.

LLC vs umbrella insurance for rental property risk management

While an LLC offers liability protection by separating your personal assets from your rental business, it doesn’t replace insurance. Landlord insurance policies cover property damage, liability claims, and loss of rental income.

An umbrella insurance policy provides an extra layer of liability coverage beyond your primary policies.

Choosing between relying on an LLC’s protection versus getting umbrella insurance isn’t an either/or decision. Many landlords benefit from both for comprehensive risk management.

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

An LLC may be a good option if you:

• Own multiple rental properties
• Want to protect personal assets from lawsuits or debts
• Seek flexibility in managing your rental business
• Plan to grow your rental portfolio over time

It might not be necessary if you have a single property with low risk, or if your holding strategy involves selling quickly rather than long-term management.

Remember, while an LLC can help protect your personal assets, it’s not a silver bullet. Proper insurance, good property management, and legal advice remain important.

Next steps: review your insurance and business setup

Consider reviewing your insurance options, including landlord insurance in Wisconsin, and discussing with a qualified professional how an LLC might fit into your overall risk management strategy.

Setting up an LLC for your rental property in Wisconsin can be a way to help protect your personal assets and structure your rental business. With reasonable filing fees, a straightforward process, and minimal ongoing requirements, it’s accessible for many landlords and investors. Just remember to stay compliant, keep good records, and pair your LLC with the right insurance coverage for the best peace of mind.