Rental property LLC

[papadad111]

Setting up LLC for DW rental property. She wants to know what is best corporate structure. S corp. C corp or pass through partnership or sole proprietorship.

Any suggested reading to know best corp structure considering minimizing taxes. Ease of filing and/or liability protection ?

Don't know where to begin aside a few Google searches.

[RonBoyd]

Did your Google search not find this?

Compare Types of Businesses | C Corp, S Corp, or LLC Business Types

As that's where I would begin.

[Fishingmn]

Personally, I don't set up an LLC for my rentals. Instead, I purchase a landlord policy from State Farm that includes $1M liability coverage. This costs me $170/year/property (it also covers some other things too).

[Senator]

All my properties are in separate LLCs. I have an LLC than acts like a holding company for the individual LLCs. I also have a S-corp with zero assets that manages them.

Each one needs a tax form. If I get into a lawsuit, I can let a property go, if I have to. I also have business umbrella and personal umbrella insurance. And a business liability policy.

There are many corporate expenses you can take that you cannot take as a sole proprietor.

With one property, I am not sure f I would bother with an LLC. If you ever want to refinance, it will be near impossible to do it with a conventional loan on an LLC.

[Another Reader]

Because liability judgements can be quite large, I carry $5M in commercial liability, the largest policy I can get from State Farm. Some risks, such as mold, are excluded. I recommend that every landlord go over their liability insurance to see what is and is not covered. I do not use LLC's, as they don't offer significantly improved protection from lawsuits while costing a lot of money to set up and maintain.

[papadad111]

Two units. Both paid off and in the clear. I want them in an LLC to protect both joint and her individual assets as well as my individual assets.

We have a 5M umbrella policy.

I want added protection so want her to set up an LLC.

One more question: Properties are solely in her name. She is DW. What risk do I carry as DH if she, as the owner, gets sued? Are assets that are in just my name subject to risk by way of marriage contract ? Worked hard for what I have. Don't want some jack@55 taking it all away.

Google search...yuck. Turned up a few nuggets among the 500000 hits and most are advertising legal services and are very light on actual useful information. The post that Ron highlighted was typical of what I am finding ergo. 2 paragraphs of depth but no how-to or hypothetical examples / information beyond very basic what it is. (I'm no lawyer. Why do lawyers only make web sites scrounging for money. Guess it's for dummies like me to pay up).

From what I can tell the requirement to maintain an LLC is pretty minimal. Have an agent , file a tax form or two. Get properties re-titled in name of LLC and get rental contracts into LLC name. Am I missing something ?

Should the umbrella policy be in my name jointly with DW or just her name since she is owner OR should I get two policies- one for general family protection and a separate one in the name of the LLC ?

[Senator]

Quote:

Originally Posted by papadad111 From what I can tell the requirement to maintain an LLC is pretty minimal. Have an agent , file a tax form or two. Am I missing something ?

That's it. You can be your own agent. I have heard that multi-member LLCs protect better than single member LLCs.

The best thing you can do is avoid situations where you could get into trouble. The second best thing is to make it more complicated and expensive to sue you. The third is to have a decent insurance policy.

If someone really wants you, they will get you. You just need to make it expensive for them to do so, and give them some doubt to whether or not the trip will be successful and worth it.

With rental property, your main risk is not the tenants, it is the government. Rental licensing, building codes, etc. can all cost you a bundle.

Imagine if you have a duplex, or an apartment building, and the City takes away your rental license. Or you decide to sell. In many cities, there is no guarantee a new owner will even get a rental license.

[papadad111]

Thanks senator. Your advise is always wise.

Any thoughts on how best to protect assets in my own name (not held jointly) if DW (sole owner of properties and eventually owner of LLC) were to get sued?

Does marriage impact the risk profile of non-jointly held assets ?

I'm just paranoid as hell... Hate lawyers. Hate how lawyers work what should be a black and white legal system.

These are not quite slumlord properties but they aren't worth a whole lot. It's 2 units of a quadplex and I can't control all tenants so worry Crack heads move in who burn down the place and sue DW.

Sorry to ramble ... 📢

[Senator]

Quote:

Originally Posted by papadad111 From what I can tell the requirement to maintain an LLC is pretty minimal. Have an agent , file a tax form or two. Am I missing something ?

That's it. You can be your own agent. I have heard that multi-member LLCs protect better than single member LLCs.

The best thing you can do is avoid situations where you could get into trouble. The second best things is to make it more complicated and expensive to sue you. The third is to have a decent insurance policy.

If someone really wants you, they will get you. You just need to make it expensive for them to do so, and give them some doubt to whether or not the trips will be successful and worth it.

With rental property, your main risk is not the tenants, it is the government. Rental licensing, building codes, etc. can all cost you a bundle.

Imagine if you have a duplex, or an apartment building, and the City takes away your rental license. Or you decide to sell. In many cities, there is no guarantee a new owner will even get a rental license.

Or the city could require you to bring the entire building up to code, no lead paint, split utilities, etc. at a cost of a large bundle.