7+ Licenses and Permits You May Need to Open a Property Management Company

Are you considering opening a property management company to take advantage of the booming real estate market? While the prospect of managing properties for others may seem like a lucrative and rewarding venture, it's essential to understand that there are various licenses and permits required to operate legally and efficiently. Navigating the complex world of regulations and requirements can be daunting, but it's crucial to ensure your business is built on a strong foundation. In this article, we will explore over seven essential licenses and permits that you may need to obtain before opening the doors to your property management company. By understanding these requirements, you can avoid potential legal issues and focus on providing exceptional service to your clients. So, let's dive in and discover the essential building blocks to establish a successful property management business.

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Written by:
Nick
Updated on:
April 17, 2023
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Table of Contents:

Our List of 7+ Licenses and Permits You May Need to Open a Property Management Company:

Below is a list of possible Property Management Company licenses and permits needed. Please note it will vary state by state, so please do extensive research before starting.

1. Business Entity Registration.

A Business Entity Registration is a formal process of registering a business with the state government. It creates a legal entity that is separate from its owners and provides the business with a unique identification number for tax and legal purposes.To start a Property Management Company, you will need to register your business as a legal entity. This will protect your personal assets from any liabilities that may arise from the business. It will also allow you to open a business bank account, apply for business licenses and permits, and hire employees. Additionally, many states require property management companies to be licensed and registered, and having a Business Entity Registration is a requirement for obtaining this license.

Check if your state requires a Business Entity Registration.

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2. General Business License.

A General Business License is a permit that allows a business to legally operate within a certain jurisdiction. It is required by most states and cities and is issued by the local government. To start a Property Management Company, you may need a General Business License because property management involves managing properties on behalf of property owners. This includes activities such as collecting rent, marketing properties, screening tenants, and maintaining properties. These activities require a business license to operate legally. Additionally, a business license may be required to open a business bank account, obtain insurance, and to comply with local tax regulations.

Check if your state requires a General Business License.

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3. Real Estate Broker License.

A Real Estate Broker License is a professional license that allows an individual to legally represent clients in real estate transactions, such as buying, selling, leasing, and managing properties. It is a higher level of licensing than a Real Estate Salesperson License, which only allows an individual to work under a broker.To start a Property Management Company, you may need a Real Estate Broker License because property management involves managing properties on behalf of property owners, which may include leasing, rent collection, maintenance, and repairs. These activities may require a broker license in some states, as they involve negotiating and entering into contracts on behalf of property owners. Additionally, having a broker license may provide greater credibility and trust with clients, as it demonstrates a higher level of expertise and professionalism in the real estate industry.

Check if your state requires a Real Estate Broker License.

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4. Property Management License.

A Property Management License is a certification that allows an individual or company to legally manage rental properties on behalf of property owners. It is required in some states and jurisdictions to operate a property management company.To start a property management company, you may need a license to comply with local laws and regulations. The license ensures that you have the necessary knowledge and skills to manage properties effectively and ethically, and protects both property owners and tenants from fraud, mismanagement, and other issues. Additionally, having a license can help you establish credibility and trust with clients, which can be important for building a successful business.

Check if your state requires a Property Management License.

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5. Employer Identification Number (EIN).

An Employer Identification Number (EIN) is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses for tax purposes. It is used to identify a business entity and is required for filing tax returns, opening bank accounts, and hiring employees.A Property Management Company may need an EIN to establish its business entity and to comply with tax laws. Additionally, if the company plans to hire employees, an EIN is required to report wages and taxes to the IRS. Finally, many states require a Property Management Company to have an EIN to obtain a business license or permit.

Check if your state requires a Employer Identification Number (EIN).

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6. Workers' Compensation Insurance.

Workers' Compensation Insurance is a type of insurance that provides benefits to employees who are injured or become ill as a result of their job. It covers medical expenses, lost wages, and rehabilitation costs.As a property management company, you may have employees who are responsible for maintaining and managing properties. These employees may be at risk of injury or illness while performing their job duties. Therefore, having Workers' Compensation Insurance is essential to protect your employees and your business from financial losses in the event of an accident or injury. It is also a legal requirement in most states to have this insurance coverage for employees.

Check if your state requires a Workers' Compensation Insurance.

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7. Professional Liability Insurance.

Professional Liability Insurance, also known as Errors and Omissions Insurance, is a type of insurance that provides financial protection to professionals against claims of negligence, errors, or omissions in their professional services. It covers legal defense costs, settlements, and judgments that may arise from lawsuits filed against the insured.If you are starting a Property Management Company, you might need Professional Liability Insurance to protect yourself and your business from potential lawsuits that may arise from your professional services. As a property manager, you are responsible for managing other people's properties and assets, and any mistakes or negligence on your part could result in financial losses or damages to your clients. Professional Liability Insurance can help you mitigate these risks and ensure that your business is protected from the financial consequences of lawsuits.

Check if your state requires a Professional Liability Insurance.

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Frequently asked questions

Everything you need to know about the business licenses.

What is the best business formation license for a Property Management Company?

The best business formation license for a Property Management Company may vary depending on the specific needs and goals of the business, as well as the state in which it operates. However, a Limited Liability Company (LLC) is often considered a suitable choice for property management companies due to its flexibility, liability protection, and potential tax benefits. It is advisable to consult with a legal or business professional to determine the most appropriate business structure for your specific situation.

Is it required to have a general business license for a Property Management Company?

The requirement for a general business license for a Property Management Company varies depending on the location and jurisdiction where the business operates. In some areas, a general business license may be required, while in others, a specific property management license or real estate broker's license may be necessary. It is essential to consult with local government agencies and regulations to determine the specific licensing requirements for a property management company in your area.
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Nick

Founder and CEO

I'm Nick, co-founder of newfoundr.com, dedicated to helping aspiring entrepreneurs succeed. As a small business owner with over five years of experience, I have garnered valuable knowledge and insights across a diverse range of industries. My passion for entrepreneurship drives me to share my expertise with aspiring entrepreneurs, empowering them to turn their business dreams into reality.

Through meticulous research and firsthand experience, I uncover the essential steps, software, tools, and costs associated with launching and maintaining a successful business. By demystifying the complexities of entrepreneurship, I provide the guidance and support needed for others to embark on their journey with confidence.

From assessing market viability and formulating business plans to selecting the right technology and navigating the financial landscape, I am dedicated to helping fellow entrepreneurs overcome challenges and unlock their full potential. As a steadfast advocate for small business success, my mission is to pave the way for a new generation of innovative and driven entrepreneurs who are ready to make their mark on the world.