A landlord asks this week about setting up a legal entity for his rentals, so that is the question for Ask Landlord Hank. Remember Hank is not an attorney and he is not offering legal advice.
Dear Landlord Hank:
I own five rental properties and plan to acquire more. Should I set-up a legal entity, i.e. a limited liability company (LLC), S-Corp for myself and these properties? Thank you in advance. –Richard
Hi, Landlord Richard:
I like LLCs for a number of reasons, but the main reason is that they actually limit liability to the assets of the company, in this case one property – or however many you choose to put in the LLC.
Many folks will have an LLC for each separate property. If someone sues you at one of your rental properties, the most you could lose would be the value of your asset – in other words, that single property. Your personal assets or other properties can’t be used to satisfy a judgement against one LLC. Also, the LLC is not taxed itself; the taxes flow through to you.
LLCs are easy and inexpensive to set up and run. You don’t have to have regular meetings, etc., but you do have to register every year, and you need an operating agreement.
In my opinion, LLCs are the way to go. Good luck!
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