Should You Own Your Rental Property Under an LLC in NC?
If you’re a rental property owner in North Carolina, you’ve likely wondered:
“Should I hold my investment property in an LLC?”
At Priority Property Group, this is one of the most common questions we hear from both new landlords and seasoned investors. Whether you own a single rental or a growing portfolio, it’s important to understand how an LLC (Limited Liability Company) affects your legal protection, finances, and long-term strategy.
This article breaks down the key considerations for North Carolina property owners thinking about structuring their rental property under an LLC.
What Is an LLC?
A Limited Liability Company is a legal business structure that separates your personal assets from your business assets. It’s commonly used by real estate investors because it can reduce personal liability and simplify how you manage income, taxes, and risk.
Benefits of Holding a Rental Property in an LLC
1. Personal Liability Protection
The main benefit of forming an LLC is asset protection. If a tenant or third party sues due to an injury or incident on the property, having the rental owned by an LLC can help protect your personal assets, such as your primary residence or savings.
However, this protection only applies if the LLC is properly formed and maintained — including keeping separate bank accounts and records.
2. Cleaner Bookkeeping
Using an LLC can make it easier to track expenses, income, and tax deductions specific to each property. Many investors who own multiple rentals choose to form separate LLCs for each property to further isolate risk and simplify accounting.
3. Flexible Tax Treatment
By default, single-member LLCs are treated as pass-through entities, meaning the profits and losses flow directly to your personal tax return. However, you can elect different tax treatments (such as S-Corp status) based on your goals. Always consult a CPA before making that decision.
4. Professional Presentation
An LLC adds a layer of professionalism when dealing with tenants, vendors, and lenders. It shows that you’re running a business — not just renting out a spare property.
Potential Drawbacks of Using an LLC
1. Financing Limitations
If you already have a mortgage on your property, transferring it into an LLC can trigger a due-on-sale clause, allowing the lender to call the loan due. Many investors navigate this by working with lenders that allow for LLC ownership from the start or by holding property personally while still managing it professionally.
Buying property under an LLC may also require a commercial loan, which typically involves higher interest rates or stricter underwriting.
2. Administrative Costs
Setting up and maintaining an LLC in North Carolina involves some cost and paperwork:
$125 to register with the North Carolina Secretary of State
$200 annually for the required Annual Report
Additional legal or tax advisory fees, depending on your setup
These costs are minimal for most investors, but they should be factored into your decision.
3. Separate Recordkeeping
You’ll need to keep business finances completely separate from personal finances. That means:
A separate bank account
Dedicated bookkeeping or accounting
Consistent documentation practices
For owners already using a property manager or CPA, this is usually manageable.
North Carolina-Specific Considerations
North Carolina is considered LLC-friendly, with relatively low fees and simple maintenance requirements.
All LLCs must file an Annual Report and maintain a registered agent (which can be you or a third-party service).
Transferring ownership from personal name to LLC may incur transfer taxes or other legal requirements — always consult with a real estate attorney before transferring title.
When Does It Make Sense to Use an LLC?
An LLC may be a good fit if you:
Want to protect your personal assets
Plan to grow your portfolio
Prefer cleaner accounting and separation of ownership
Are treating your rental like a long-term business
An LLC may not be necessary if you:
Own one low-risk property
Have mortgage restrictions that prevent transfer
Aren’t prepared for the small admin costs and upkeep
What We Recommend
At Priority Property Group, we’ve worked with North Carolina landlords who own properties both personally and through LLCs. In our experience, forming an LLC can provide useful protection and peace of mind — but only if it aligns with your investment goals and is set up properly.
We always advise speaking to:
A real estate attorney, to help with entity formation and deed transfers
A CPA, to ensure your tax structure supports your broader financial plan
Whether or not you form an LLC, having a trusted property manager ensures your investment is protected day-to-day — with compliant leases, vetted tenants, and proactive maintenance.
Need Help or Want to Talk It Through?
We’re happy to offer a free consultation to review your rental property and help you understand the pros and cons based on your situation.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Always consult with a licensed attorney or certified public accountant before making business decisions related to property ownership or legal structures.