Do you want to know the legal requirements you need to start a property management business? If YES, here is a checklist of property management licenses, permits & insurance.
Having provided you with a:
- Real Estate Industry Overview
- Market Research and Feasibility
- Property Management Business Plan
- Property Management Marketing Plan
- Property Management Firm Name ideas
- Property Management Licenses and Permits
- Cost of Starting a Property Management Company
- Real Estate Management Firm Marketing ideas
We will consider what it takes to get operating license and permit for your property management business including insurance coverage and intellectual property protection.
Getting a Property Management License, Permit & Insurance
- The Best legal entity to use for a real estate management business
When it comes to choosing the legal entity and business framework to use for Property Management Company, choosing a Limited Liability Company; an LLC is your best bet. With Limited Liability Company, you can limit the risk of the business to the business alone and not to your personal properties.
It is important to note that if you choose a Limited Liability Company as your legal entity, you will be protected from personal liability. For example; if during the cause of running your property management business and an issue arises (damages was done) between you and a tenant or between you and the property owner, their lawyers are not permitted by law to go after your personal properties.
In such situation, it is only the money that you invested into the limited liability company that will be at risk. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholder meetings and other managerial formalities that will restrict you from carrying out your business responsibilities.
Well if you want to start a property management company a small scale and perhaps from your house and just to cover a smaller neighborhood, then choosing a sole proprietorship is your best legal entity.
Is Professional Certification / License Needed to Start a Property Management Company
In the United States, states such as Texas, New York, and Colorado, makes it mandatory for property management companies to be licensed and certified real estate brokers if they are going to be involved in collecting rent, listing properties for rent or helping negotiate leases and doing inspections as required by their business. Although a property manager may be a licensed real estate salesperson but generally they must be working under a licensed real estate broker.
A few states, such as Idaho, Maine, and Vermont do not require property managers to have real estate licenses. Other states, such as Montana, Oregon, and South Carolina, allow property managers to work under a property management license rather than a broker’s license. Washington State requires property managers to have a State Real Estate License if they do not own the property.
List of Legal Documents You Need to Run a Property Management Business
These are some of the basic legal document that you are expected to have in place if you want to run your own property management company in the United States of America;
- Certificate of Incorporation
- Business License
- Real Estate License / Real Estate Broker’s License
- Business Plan
- Non – disclosure Agreement
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
Insurance Policies for a Property Management Business
If your intention of starting a property management company is to operate a small scale business, then you can make do with two or more different insurance covers. Conversely; if you are operating a Limited Liability Company and you intend to hire workers to work for you, then you should go all the way to ensure that you have the basic insurance cover for your property management company.
Here are some of the basic insurance covers that you should consider purchasing if you want to start your own property management business in the United States of America;
- General insurance
- Health insurance
- Liability insurance
- Workers compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
Intellectual Property Protection for a Property Management Business
No doubt there are several businesses that you can’t operate without first ensuring that you secure an intellectual property protection for your works. Also, there are some businesses that can successfully run without securing an intellectual property protection and of course property management business is one of such business.
There is no need to bother yourself with filing for intellectual property protection for your property management company, since you are going to be involved in will delivering services (managing properties for your clients).