By Nick Bartlett, Realtor and owner of Freedom Rental Property Management in Maple Grove, Minnesota.
Short answer: Yes, you should use an LLC for rental property. A Minnesota LLC costs $155 to form online and $0 a year to renew, and it keeps a lawsuit over the rental away from your home, savings and paycheck. I use one LLC for all of my own rentals, not one per property, and I recommend a $1 million or $2 million umbrella policy over the whole portfolio. A separate LLC for each property adds a little more protection and a lot more accounting work and cost.
Key takeaways
- An LLC separates the rental’s liabilities from your personal assets, but only if the money stays separate and the deed and insurance are in the LLC’s name.
- Minnesota charges $155 to form an LLC online ($135 by mail) and nothing for the annual renewal, which is due by December 31.
- An LLC doesn’t protect you from your own negligence or from a loan you personally guaranteed. Liability insurance and an umbrella policy cover that gap.
- A parent holding LLC that owns a separate LLC for each property is a real structure. Some CPAs and asset protection attorneys recommend it, mostly for larger portfolios.
- Minnesota’s LLC law has no series LLC option, so per-property separation in Minnesota means forming a separate LLC for each property.
- For an owner with 1 to 10 rentals, one LLC plus a $1 million or $2 million umbrella policy gives the most protection per dollar.
“Should I put my rental in an LLC?” is one of the first questions new owners in Maple Grove, Plymouth, Minneapolis and across the Twin Cities ask me. The second question comes right behind it: “Should I have one LLC for all my rentals, or a separate LLC for each house?”
I own rentals myself, and I’ve answered both questions for my own portfolio. This post covers what I do and why, plus what the attorneys and CPAs who argue for more LLCs recommend, so you can see both sides before you talk to your own advisors.
One note before we start, and I’ll only say it once: I’m a property manager and a Realtor, not an attorney or a CPA. The rules in this post come from Minnesota statutes, the Minnesota Secretary of State and the IRS, linked throughout. Your situation will have details that change the answer, so take this to an attorney and your tax preparer before you set anything up.
Should you put your Minnesota rental property in an LLC?
What an LLC for rental property protects
Yes. An LLC, or limited liability company, is a separate legal entity that owns the rental instead of you. If a tenant or a guest sues over something at the property, the claim is against the LLC, and the LLC’s assets are what’s at risk. Your house, retirement accounts and bank accounts sit outside of it. Under Minnesota Statutes section 322C.0304, a member isn’t personally liable for the LLC’s debts just because they’re a member.
The cost is low. The Minnesota Secretary of State fee schedule lists $155 to file articles of organization online or in person, $135 by mail, and $0 for the annual renewal. The renewal is due by December 31 every year, and an LLC that misses it is administratively terminated, so put it on your calendar.
There’s a privacy benefit too. Once the deed is in the LLC’s name, Hennepin, Anoka, Wright and every other Minnesota county’s property records show the LLC as the owner, so a tenant who looks up the house sees a company name instead of yours.
What doesn't an LLC protect you from?
Your own actions and personal guarantees
An LLC protects you from the rental’s debts and lawsuits. It doesn’t protect you from your own actions. If you replace the deck railing yourself and it gives way under a tenant, the tenant can sue you personally for your negligence, not only the LLC. That’s one more reason I talk owners out of doing their own maintenance on a rental.
An LLC also doesn’t protect you from a loan you personally guaranteed. Most lenders require a personal guarantee on an LLC loan, so the bank can still come after you if the loan goes bad.
How owners lose LLC protection
Piercing the veil is when a court ignores the LLC and holds the owner personally liable. The fastest way to get there is to treat the LLC’s money as your own. Keep these habits from day one:
- Open a separate bank account for the LLC and run all rent and expenses through it.
- Put the deed and the insurance policy in the LLC’s name, and list the LLC as the owner on your management agreement.
- Sign contracts as a member or manager of the LLC, not as yourself.
- Never pay personal bills from the LLC account.
- File the Minnesota annual renewal by December 31.
How do you move a Minnesota rental you already own into an LLC?
You move a rental into an LLC with a warranty deed from you to the LLC, recorded with the county where the house sits, such as Hennepin, Anoka or Wright County. You can prepare the deed yourself or have an attorney do it, and the cost is modest. Owners move rentals into LLCs all the time. Four things to handle along the way:
- Your mortgage. Federal law at 12 U.S.C. 1701j-3 lets a lender call the full loan due when the property is transferred. The law protects some transfers, such as a transfer to a living trust you benefit from, but a transfer to an LLC isn’t on that list. In my experience, most lenders aren’t picky about this. As long as the payments keep coming in, they’re happy. It’s still your loan, so know the clause is there and call your lender if you want certainty. Some owners leave existing rentals in their own names and buy every new rental in the LLC from the start.
- Your insurance. The landlord policy has to name the LLC as the insured. If the policy is in your name and the LLC owns the house, you’ve created a gap right where you wanted protection.
- Your title policy and deed tax. Ask your title company or attorney whether your owner’s title policy carries over to the LLC and what deed tax and recording fees apply to the transfer.
- Your leases and rent. Rent should land in the LLC’s bank account. If you manage the property yourself, sign new leases as the LLC. If Freedom manages it, we sign leases as your agent, and Minnesota Statutes section 504B.181 requires the tenant to get, in writing before the tenancy starts, the name and address of the manager and of the landlord or an agent the landlord authorizes to accept legal papers. We update the owner of record, send distributions to the LLC’s account and, if an eviction is ever needed, file it in the LLC’s name.
Should Minnesota landlords use one LLC for all rentals or a separate LLC for each property?
One LLC for all of your rentals is enough for most owners, and it’s what I do with my own properties. The LLC is cheap, and it shields your personal assets from the business. A separate LLC for each property adds one more layer: if one house is sued, the other houses aren’t in the same LLC, so they’re out of reach. In my opinion that extra layer doesn’t add much protection, and it adds a lot of work and expense on the accounting side.
Here’s why. When a tenant or a guest sues over one of your houses, the claim goes to your insurance first. Your landlord liability policy hires the defense attorney and pays a settlement or judgment up to its limit, and your umbrella policy pays above that. That’s how rental lawsuits get solved: with insurance coverage, not with extra LLCs. Separate LLCs only come into play when a judgment is bigger than all of your coverage combined, or when the claim falls outside your policies, such as an intentional act or something your policy excludes. With $300,000 to $500,000 on the landlord policy and a $1 million or $2 million umbrella on top, that gap is narrow. Read your policy’s exclusions with your agent so you know exactly what isn’t covered.
The other side has a fair point, and it’s worth hearing. Northwest Registered Agent lays out the risk plainly: with all five rentals in one LLC, a big judgment over one house can reach the other four. Attorney Edward Schenkel, writing on BiggerPockets, says one LLC per property gives the strongest protection but costs the most to run, and he suggests a middle path for investors with 10 or more properties: a few LLCs, grouped by property type.
Three ways to structure LLCs for rental properties
There are three structures owners use:
- One LLC owns every rental. Lowest cost and the least paperwork.
- A separate LLC for each property. Each house is walled off from the others.
- A parent holding LLC that owns a separate LLC for each property. Each house is walled off, and you own one company instead of a handful.
The table that follows compares them for an owner with 5 rentals.
| Structure (5 rentals) | If one property is sued | LLCs to form | Minnesota filing fees | Bank accounts and books | Federal returns if a married couple owns it | Best fit |
|---|---|---|---|---|---|---|
| One LLC for all rentals | All 5 properties are in the same LLC | 1 | $155 | 1 | 1 Form 1065 | 1 to 10 rentals, paired with an umbrella policy |
| Separate LLC for each property | Only that property’s LLC is exposed | 5 | $775 | 5 | 5 Form 1065s | Larger portfolios or a lot of equity per house |
| Parent LLC owning one LLC per property | Only that property’s LLC is exposed | 6 | $775, plus the parent’s state fee | 6 | 1 Form 1065 when the parent owns 100% of each property LLC | 10 or more rentals, estate planning, partners |
Minnesota filing fees are the $155 online fee from the Secretary of State for each LLC that owns Minnesota property. An LLC formed in another state that owns a Minnesota rental registers here as a foreign LLC, which costs $205 online.
What does a separate LLC for each rental property cost?
Tax returns, books and bank accounts
The filing fee is the small part. The real cost of a separate LLC for each rental property is the accounting. Each LLC needs its own bank account and its own set of books, whether that’s a separate QuickBooks file or another way to track it.
Tax filings depend on who owns the LLC. The IRS treats an LLC with one owner as a disregarded entity, so the rental goes on Schedule E of your personal return with no separate federal return. An LLC with two or more owners, and that includes a married couple who both own it, is taxed as a partnership. Each one files its own federal Form 1065 and K-1s, plus a Minnesota partnership return, every year.
Here’s an example for a married couple who owns 5 rentals together. Say your CPA charges $800 per partnership return and keeping each set of books costs $300 a year. One LLC runs about $1,100 a year. Five LLCs run about $5,500 a year. That’s $4,400 more every year, or $44,000 over 10 years, for a little more protection. Get real quotes from your CPA, but that’s the kind of gap I mean when I say thousands of dollars a year depending on the size of your portfolio.
Time is a cost too. If you do your own books, every extra LLC is another bank account to reconcile each month, another set of year-end statements and tax documents to pull together, another insurance listing to keep current and another Minnesota annual renewal to file. My estimate is a few extra hours a year per LLC, and that time grows with every house you add.
Can one parent LLC own a separate LLC for each property?
Yes, it’s a real structure. A parent LLC, called a holding company, owns 100% of a separate LLC for each property. You own the parent, the parent owns the property LLCs, and each property LLC owns one house. Some CPAs and asset protection attorneys recommend it, mostly for owners with larger portfolios.
Jason Watson, a CPA at WCG CPAs and Advisors, describes the setup with a Wyoming parent LLC that owns a single-member LLC for each rental. He lists privacy, liability protection and simpler estate planning as the benefits, since you pass down one company instead of a stack of deeds. He also warns that layering entities can look more precise than it is, and that getting a tax ID number for each property LLC is more cumbersome than a normal online application.
The tax side can be simpler than people expect. When the parent owns 100% of each property LLC, the property LLCs are disregarded for tax purposes and everything rolls up into the parent’s return. The work that doesn’t go away is the separate bank accounts, separate books and separate insurance listings for every property LLC, plus the Minnesota filings: each property LLC is either formed in Minnesota for $155 or registered here as a foreign LLC for $205.
My take: if you own 10 or more rentals, have a lot of equity in each one or have partners, a holding structure is worth a conversation with an attorney. For an owner with a few houses, it’s more structure than the risk calls for.
Does Minnesota allow series LLCs for rental property?
No. A series LLC is a single LLC with separate internal “series,” each holding its own property and its own liabilities, so you get per-property separation with one filing. Northwest Registered Agent counts about two dozen states that allow them. Minnesota’s LLC law, Chapter 322C, has no series provision.
A Minnesota owner who wants each property walled off forms a separate LLC for each one or uses the parent and property LLC structure. Forming a series LLC in another state to hold Minnesota rentals adds a foreign registration here, and I wouldn’t count on its internal walls in a Minnesota courtroom without an attorney telling me otherwise.
Is an umbrella policy better than an LLC for rental property?
Use both
It’s not either-or. An LLC limits what a plaintiff can reach. Insurance pays the claim. What I recommend is one LLC, a landlord liability policy on every property and a personal umbrella policy that covers all of your properties. You can get an umbrella policy with $1 million or $2 million of liability coverage, which is plenty for most rental owners.
An umbrella policy kicks in after the liability limit on your landlord policy runs out. It also covers you personally, including your own negligence, which is exactly the gap an LLC leaves open. Steadily, a landlord insurer, puts umbrella coverage at about $200 to $400 a year for $1 million to $2 million, and Coverage Cat quotes $300 to $600 a year for $1 million. Umbrella insurers set a minimum liability limit on each underlying landlord policy, and Steadily puts that minimum at $300,000 to $500,000.
Two details matter here:
- Make sure the umbrella covers the LLC. Coverage Cat notes that some personal umbrella policies exclude rentals owned by an LLC because the insurer treats them as business activity. Ask your agent to list the LLC and every property on the umbrella, or buy a commercial umbrella, and get the answer in writing.
- Set your landlord policy limits high enough. Freedom requires owners to carry at least $300,000 of liability on the landlord policy, with $500,000 preferred, and to name us as additional insured. I explain why in should I add my property manager as additional insured.
Tenant insurance helps too. Every Freedom tenant carries renters insurance with at least $100,000 of liability coverage through our resident benefit package, so a claim the tenant causes, such as a kitchen fire, can go to the tenant’s policy instead of yours.
How I set up my own rentals
I keep it simple:
- One LLC owns all of my rentals.
- Every property has its own landlord policy with the LLC named as the insured.
- An umbrella policy with $1 million or $2 million of coverage sits over all of them.
That gets me most of the protection of a multi-LLC structure for a fraction of the cost and paperwork. If my portfolio grew to the point where one lawsuit could wipe out years of equity across a lot of houses, I’d revisit a holding structure with my attorney. If you’re setting up a new rental, also read my guide to the tax rules when you turn your home into a rental, and our rental property management FAQ for more owner questions.
Frequently asked questions
Is an LLC worth it for just one rental property?
Yes. A Minnesota LLC costs $155 to form online and $0 a year to renew, which is cheap protection for a house worth hundreds of thousands of dollars. If you own the LLC alone, it doesn’t file its own federal tax return, so the added work is a separate bank account and keeping the deed and insurance in the LLC’s name.
Does an LLC protect me if I’m sued personally?
Not for your own actions. An LLC shields your personal assets from the rental’s debts and lawsuits, but if you personally caused the injury, such as a repair you did yourself, or you personally guaranteed a loan, you can be sued as an individual. That’s the gap a personal umbrella policy fills.
Do I have to file a separate tax return for my rental LLC?
It depends on who owns it. An LLC with one owner is a disregarded entity, so the rental stays on Schedule E of your personal return. An LLC owned by two or more people, including a married couple, is taxed as a partnership and files its own federal Form 1065 and a Minnesota partnership return every year.
Can I move a rental with a mortgage into an LLC?
You can, but call your lender first. Federal law lets a lender call the loan due when the property is transferred, and a transfer to an LLC isn’t on the list of protected transfers. Also update your insurance to name the LLC, and ask your title company about deed tax, recording and your owner’s title policy.
Does an umbrella policy cover rentals owned by an LLC?
Not automatically. Some personal umbrella policies exclude property owned by an LLC because the insurer treats it as business activity. Ask your agent to list the LLC and every property on the umbrella, or buy a commercial umbrella, and get the answer in writing.
Does Minnesota allow series LLCs?
No. Minnesota’s LLC law, Chapter 322C, has no series LLC provision. A Minnesota owner who wants each property walled off from the others forms a separate LLC for each property, or uses a parent LLC that owns a separate LLC for each property.
Talk to a Twin Cities property manager who owns rentals too
Whether your rental is in your name or an LLC, Freedom Rental Property Management handles the tenants, the maintenance and the paperwork for owners across the Twin Cities, from Maple Grove and Plymouth to Minneapolis. See our full service area. When an owner moves a property into an LLC, we update the owner of record and the insurance requirements so nothing falls through the cracks. Contact us with questions, or get a free rental analysis to see what your home will rent for.
