Sunday, June 23, 2019

Should You Create an LLC For Your Rental Property Investments?

Benefits of Owning Rental Property Through an LLC

Personal Liability Protection

One of the main benefits of owning and managing your rental real estate through an LLC is that it limits your personal liability. 룰렛 이기는 방법This means the assets of your LLC, like your property and the money in a business bank account, are completely separate from your own individual assets, like your home, car and personal bank account.
For example, if a tenant were to fall down some stairs and injure themselves as a result of a loose carpet, they may decide to sue to cover their medical expenses, discomfort and any loss of earnings. Without an LLC, the property owner would need to defend both their business and personal assets against a lawsuit. But as an LLC, liability protection means the LLC itself would be named and sued, and not the individual owner.
This liability protection isn’t completely foolproof, but it can be an extremely useful barrier between personal and business assets. 룰렛 전략Make sure you have completely separate accounting records and bank accounts, and try never to commingle funds between your personal and business affairs.

Taxation

LLCs also provide simplified taxation for a business owner. If you were taxed as a C Corporation, you could end up paying taxes twice on real estate earnings — once as the company, and once as yourself for any profits earned.
In contrast, with an LLC, any income or capital gains earned by the LLC pass through to the owner directly. This applies to both rental earnings and any increase in the value of the property.룰렛 카지노 You can also deduct expenses for areas like mortgage interest, utilities, marketing and most other costs incurred in running and renting out a property.
This combination of liability protection and pass-through taxation makes LLCs a very attractive option for rental property businesses.

The Importance of Liability Insurance for Rental Properties

Even though an LLC provides personal liability protection, it’s always worth having liability and other property, landlord and tenant insurance in place. This can protect you if anything happens to the property or the people living there, and can shield your business assets from issues. Of course, insurance isn’t perfect, and you’ll need to be aware of certain areas, including:
  • Liability policy limits in terms of deductions and total amounts payable
  • Liability policy exceptions (for example, if a building is not up to code or has other failures the policy doesn’t cover)
It’s vital to review your liability insurance documents in detail and to get clarity on any areas you don’t understand.

Other Benefits of Limited Liability Companies for Property Owners

LLCs do have other benefits if you’re a real estate entrepreneur:
  • Running and managing an LLC is fast and easy, especially compared to corporations (which have much more complex rules).
  • You have flexibility in how you issue earnings and profits within an LLC. This is normally defined in your LLC Operating Agreement.
  • LLCs can make it easier to transfer property ownership between members.
If you need more information in any of these areas, speak to a professional who has expertise in property LLC management and transfer of ownership.

Series LLCs for Rental Properties

A Series LLC is a specialized type of LLC that’s only available in certain states, specifically:
  • Utah
  • Texas
  • Tennessee
  • Puerto Rico
  • Oklahoma
  • Nevada
  • Montana
  • Missouri
  • Kansas
  • Iowa
  • Illinois
  • District of Columbia
  • Delaware
  • Alabama
Series LLCs can be ideal for real estate owners and property entrepreneurs, since they function like a regular LLC with one very important exception: You can create unique “series” or “parts” of the LLC. Each series has its own interests, assets, ownership and operations.
Your overall LLC is the owner of the Series LLCs underneath it. Each Series LLC acts as a completely independent business, 룰렛 프로그램so you could assign one rental property, apartment or vacation home to a different part of the series. Each part of the series has:
  • A unique name (Chatham Road Property LLC, for example)
  • Its own records, accounting and finances
  • A separate business bank account
  • Separate capital for business operations
  • Its own business objectives and goals
  • Its own profits and losses
  • Unique, individual signing authority on contracts and other documentation
  • Different members or managers, if necessary
  • Different ownership, obligations and rights from their members or managers
The main advantage here is that each part of the series has its own liability protections. Issues with one property that impact liability shouldn’t transfer over to other properties, which provides more insulation of business assets.
It is more work to create a Series LLC for every property you have, but that could be a worthwhile time investment for the protection it offers.