How to Start a Property Management Company in 2026, Step by Step

Start with the license. In most states, leasing property or collecting rent for someone else for a fee is real estate brokerage, so the company needs a licensed broker in charge before it signs its first owner.¹² A few states issue a separate property manager license, and a few do not license residential rental management at all.³⁴ After licensing comes the entity and EIN, a trust account for client money, a written management agreement, insurance, fair housing training and your tax reporting setup, in roughly that order.

The order matters because the steps stack. The IRS asks LLCs and corporations to form with the state before applying for an EIN, banks typically ask for the EIN when you open business and trust accounts, and in a licensing state you cannot collect rent for an owner until the license is active.

Step 1: Find out what license your state requires

There are three patterns. Check yours on the state pages at /licensing and then read the statute itself, because exemptions differ a lot from state to state.

Pattern one: property management is brokerage. This is the most common setup. California defines a real estate broker to include anyone who, for compensation, leases or rents property for others, solicits prospective tenants, or "collects rents from real property."¹ Texas defines a broker to include a person who, for a fee, leases real estate or negotiates a lease for another person, and also one who "controls the acceptance or deposit of rent from a resident of a single-family residential real property unit."² That last clause catches single-family managers who think they only collect rent.

Pattern two: a separate property manager license. Montana created one in 2023. Its code says a person "may not practice as a property manager" without a license, and it defines property manager broadly enough to include showing units, procuring tenants, overseeing maintenance and collecting rent.³⁵ Licensed brokers can manage property in Montana, and salespersons can do it only under a supervising broker. The exemptions include a person who leases no more than four residential units.⁶ South Carolina also has a separate property manager license. Its code makes it unlawful to act as a real estate property manager "without an active, valid license," and each property manager must be licensed under a property manager-in-charge or broker-in-charge.⁷

Pattern three: no license for residential rentals. Vermont's license law excludes from the definition of broker "any person who leases real estate," offers to lease it, negotiates leases, or advertises as being in the leasing business.⁴ Kansas gets to a similar place a different way. Its license act defines "lease" as renting or leasing "for nonresidential use," so residential leasing falls outside the broker definition, while commercial leasing and sales still need a license.⁸ In both states, listing or selling homes for owners still requires a license.

Two practical points. If you hold a salesperson-level license, expect to work under a broker; Montana, for example, bars a salesperson from managing property without a supervising broker.⁶ If you do not qualify as a broker yourself, the usual route is to bring one in as the firm's designated or supervising broker. And check whether your state licenses the company itself separately from the individuals, since that can mean two applications.

Step 2: Form the entity and get an EIN

If you form an LLC or a corporation, you do it with your state's secretary of state. The choice is a liability and tax question for your attorney and CPA, so this guide does not pick one for you. What matters for sequencing is that the IRS tells corporations and LLCs to "form your entity through the secretary of state before you apply for an EIN," or the application may be delayed.⁹

The EIN application is free on irs.gov, and an approved EIN is issued online right away. The IRS warns, "You never have to pay a fee for an EIN."⁹ The IRS says you generally need an EIN to hire employees, and you file tax returns and information returns, including the 1099s described below, under it.⁹

Beneficial ownership reporting no longer applies to U.S. companies. In March 2025, FinCEN published an interim final rule that removed the requirement for U.S. companies and U.S. persons to report beneficial ownership information under the Corporate Transparency Act.¹⁰ On August 14, 2026, FinCEN published a final rule that adopts that interim rule with limited changes, effective the same day.¹¹ FinCEN's own page now states that U.S. companies "are no longer required to file BOI reports," and only certain foreign companies registered to do business in the U.S. still report.¹⁰ If an old checklist tells you to file a BOI report for your new U.S. LLC, it is out of date.

Step 3: Open a trust account before you touch client money

Rent, security deposits and owner reserves are not your money. State license laws commonly require a licensee who holds funds for others to keep them in a trust account, and the details differ by state. Four examples from the statutes:

• California. A broker who accepts funds belonging to others must deposit them in a trust fund account "in a bank or recognized depository in this state," and keep them there until disbursed on instructions from the person entitled to the funds.¹²
• South Carolina. The trust account must be a demand deposit account with "trust" or "escrow" in its title, at an insured institution authorized in South Carolina. Rental cash must be deposited within 48 hours of receipt, and checks within 48 hours after the lease is signed, not counting weekends and bank holidays. Commingling is barred except for a clearly identified amount to cover bank charges.⁷
• Washington. Licensees must keep client funds "separate and apart and physically segregated" from their own, in a recognized Washington depository.¹³ The property management rule also bars automatic bank debits for recurring owner expenses, like a mortgage payment, from an account that holds tenant security deposits or funds of more than one client.¹⁴
• Montana. The department can issue a citation to a property manager for failing to meet trust account requirements, with a civil fine of $1,000 for each cited violation.¹⁵

What operators typically do: open at least one trust operating account and, where state law or the lease requires, a separate security deposit account. Title them exactly as the rule says. Reconcile every month against the bank statement and the owner ledgers (a three-way reconciliation), and keep the records for as long as your state requires. State trust rules are summarized at /licensing, and tenant deposit rules are at /states.

Step 4: Write the management agreement

The management agreement is the contract that gives you authority to act for the owner, sets your fees and defines what you may spend without asking. Some states spell out what it must contain. South Carolina requires a brokerage firm to manage residential and commercial property "under a written management agreement" that sets out, at a minimum:⁷

1. The names and signatures of the authorized parties.
2. The property identification.
3. The method of compensation to the licensee.
4. No automatic renewal clause unless either party can cancel for any cause or no cause on 30 days' notice after the original expiration date.
5. Any fee for future lease renewals, which must appear in underlined capital letters on the first page.
6. The terms and conditions of tenant rental or lease arrangements.

South Carolina also bars a management agreement from binding the property to a future listing agreement, and requires the broker-in-charge or property manager-in-charge to keep property management agreements for at least five years.⁷

Even where no statute lists contents, a workable agreement usually covers the term and termination, every fee (management, leasing, renewal, maintenance markup, late fee splits), the owner reserve, a spending limit for repairs without approval, who holds the security deposit, how and when owner draws and statements go out, the owner's insurance obligations, and authority to file evictions through counsel. In Washington, a written management agreement is also the document that can direct interest-bearing accounts for an owner's funds or tenant deposits.¹⁴ The owner onboarding playbook covers collecting the signed agreement, W-9 and reserve at the start.

Step 5: Insurance, and which parts the law requires

Errors and omissions. Some states make E&O coverage a condition of the license. Colorado's Division of Real Estate says "every active real estate licensee" must carry errors and omissions insurance covering all acts that require a license, and licensees can be covered under their company's policy.¹⁶ Where your state does not require it, the decision is a business one, and some owners ask for proof of coverage before they sign.

General liability. No federal statute requires a management company to carry general liability insurance. In practice it shows up as a contract term: office leases, management agreements and larger owners commonly require it. Read your own contracts before you price a policy.

Workers' compensation. This is a state law question. The U.S. Department of Labor runs four federal disability compensation programs, and it directs people injured on the job at private companies to their state workers' compensation board.¹⁷ Check your state's rules before your first hire, including how they treat part-time maintenance staff and leasing agents.

When you hire, the IRS hiring page reminds employers that every new hire needs a completed Form I-9, that each employee's name and Social Security number go on Form W-2, and that a signed Form W-4 should be on file for income tax withholding.¹⁸ The staff onboarding playbook and vendor onboarding playbook cover the paperwork side.

Step 6: Fair housing from the first listing

The Fair Housing Act applies to your first ad, not your fiftieth. Section 3604 makes it unlawful to refuse to rent or to otherwise make a dwelling unavailable because of race, color, religion, sex, familial status or national origin, and separately bars discrimination because of a handicap.¹⁹ It also covers what you publish: any notice, statement or advertisement that "indicates any preference, limitation, or discrimination" on a protected basis is unlawful.¹⁹ And refusing "reasonable accommodations in rules, policies, practices, or services" that a person with a disability needs is itself discrimination under the statute.¹⁹

HUD's regulation also matters to a company that is about to hire. A person is directly liable for failing to take prompt action to correct discrimination by its own employee or agent when it knew or should have known about it, and is vicariously liable for its agents' and employees' discriminatory conduct under agency law.²⁰ For a new firm, that means written screening criteria applied the same way to every applicant, a written process for accommodation requests, ad copy that describes the property and not the tenant you want, and training for every person who answers the phone. Federal rule summaries are at /federal.

Step 7: Set up federal tax reporting

A property manager is the one who reports rent to the owner. The IRS instructions say a business tenant that pays office rent to a property manager does not have to file a 1099 for it, "but the real estate agent or property manager must use Form 1099-MISC to report the rent paid over to the property owner."²¹ For payments made in 2026, the box 1 rent threshold and the Form 1099-NEC threshold for vendors and contractors are both $2,000.²¹

Collect a W-9 from every owner at onboarding and from every vendor before the first payment. Track payments by payee across all the properties you manage. The full rules, deadlines and exceptions are in our guide to 1099 rules for property managers in 2026.

Step 8: Build the core operating processes

Licensing and paperwork let you open. Processes keep owners. Before you sign the first door, write down how you handle each of these, even if the first version is a one-page checklist:

• Owner onboarding and management takeovers (owner onboarding, management takeover)
• Leads to lease (tenant lead to lease) and move-in (tenant move-in)
• Maintenance intake and dispatch (maintenance triage)
• Rent collection and late rent (delinquency)
• Renewals and move-outs (lease renewal, move-out and turnover)
• License renewals, trust reconciliations and tax dates (compliance calendar)

What to do now: startup checklist

1. Read your state's licensing statute and exemptions at /licensing. Confirm whether you need a broker license, a property manager license, or neither.
2. Line up the qualifying broker or property manager-in-charge if you do not qualify yourself.
3. Form the LLC or corporation with the secretary of state.
4. Get the EIN free on irs.gov after the entity is formed. Skip the BOI report for a U.S. company.
5. Apply for the firm license (and individual licenses) where your state requires one.
6. Open the trust account(s), titled the way your state's rule says, and set a monthly three-way reconciliation date.
7. Have counsel review your management agreement against your state's required contents.
8. Bind E&O (required in some states), general liability, and workers' compensation before the first hire.
9. Write your tenant screening criteria and accommodation request process, and train every person who talks to applicants.
10. Set up W-9 collection and 1099 tracking from day one.
11. Write the core playbooks and put license renewals and trust audits on a compliance calendar.

This guide explains what the rules say. It is not legal or tax advice for a specific company, and the state examples above are a sample, not all 50 states.