FORMING AN LLC FOR LANDLORDS
PURPOSE OF THE LLC FOR LANDLORDS
In most cases, you should establish the “LIMITED LIABILITY COMPANY” otherwise known as an LLC.
Just as it sounds, the LLC is to reduce or shield you, as the owner, from liability should there be an accident, bankruptcy etc. More below.
There are two professional that you should consult prior to creating an LLC:
- Your Certified Public Account – it will create more work for them. There are additional returns to file. You may also have to file something with your state with respect your LLC. Normally referred to as an ANNUAL REPORT for the LLC.
- Your Lawyer -you may want to consult your attorney prior to creating your LLC. Only to ensure that the creation or who you make part of the LLC is correct.
FORM YOUR LLC WITH US and OUR PROVIDER, ROCKETLAWYER
If you know the parameters of the LLC, simply use our LLC Servicing Partner:
RocketLawyer and FORM YOUR LLC
You will save a few $$$. Quick, online and easy to use.
MORE ABOUT THE LIMITED LIABILITY COMPANY
The purpose of a Limited Liability Company/Corporation is to limit your exposure to an investment or “risk”. In theory, your exposure is limited to your investment or involvement. There may be significant tax advantages as well as may be used to transfer assets for estate planning purposes.
BENEFITS OF FORMING AN LLC FOR EACH PROPERTY YOU OWN, EVEN YOUR OWN
If you are a small landlord with a couple of houses – should each one be held in a distinct LLC? Probably yes- to protect each investment on its own. So if a tenant falls and decides to sue – they may only sue that one LLC – the independent company – not you nor your other properties. Each LLC would be set up to handle one home/unit.
MORE ADVANTAGES OF THE LLC
- No requirement of an annual general meeting for shareholders.
- No loss of power to a board of directors.
- Corporations are enduring legal business entities, with lives that extend beyond the illness or even death of their owners, thus avoiding problematic business termination or sole proprietor death.
- Much less administrative paperwork and record keeping.
- Pass-through taxation (i.e., no double taxation), unless the LLC elects to be taxed as a corporation using IRS Form 8832.
- Limited liability, meaning that the owners of the LLC, called “members,” are protected from liability for acts and debts of the LLC.
- Using default tax classification, profits are taxed personally at the member level, not at the LLC level.
- Check-the-box taxation. An LLC can elect to be taxed as a sole proprietor, partnership, S-corp or corporation, providing much flexibility.
- Can be set up with just one natural person involved.
- Membership interests of LLCs can be assigned, and the economic benefits of those interests can be separated and assigned, providing the assignee with the economic benefits of distributions of profits/losses (like a partnership), without transferring the title to the membership interest (i.e., See VA and Delaware LLC Acts).
- LLCs in some states are treated as entities separate from their Members (See VA LLC Act), whereas in other jurisdictions case law has developed deciding LLCs are not considered to have separate juridical standing from their members