Have any of you ever considered creating an LLC for your rental property for the tax benefits and protection of your personal assets? Doing my taxes this year has gotten me thinking about ways to maximize deductions and credits for next year and I'm considering creating an LLC for my rental property.
If you've done it--- was it worth the hassle? What are the pros and cons?
eggplant / 11824 posts
We haven't, but we only own one rental property. Interested in hearing more though, as we plan to buy more rental properties in the future.
pomegranate / 3272 posts
Never even thought about it. We are accidental landlords as we couldn't sell the condo that we quickly grew out of. So we bought a house and are renting the condo. This all happened last year. Love to hear anyone else's thoughts.
bananas / 9899 posts
Currently we own 2 properties: Our house (which is already set up to be a rental with two apartments, but currently we are not renting it) and an industrial property for our company. Our industrial property is owned by a separate holding company altogether and the company we actually work in pays "rent" to this other company for the space. It's all very confusing, but it protects us and saves us some tax dollars.
When we eventually move out of our current home and start using it for renting again, we will be selling it to this holding company so both properties will be under the same protection.
Honestly I don't even completely understand it, my DH and our lawyer set it all up.
GOLD / squash / 13576 posts
Yes we are looking at setting up a LLC to hold property. It's one of many things on our list to do.
pineapple / 12793 posts
I would absolutely do it to limit your liability in case some one gets hurt on the property. The tax benefits are nice but the liability would be my motivating reason to LLC.
honeydew / 7444 posts
@Anagram: The one thing you have to keep in mind is that if you ever want to evict a tenant, you would have to go through a lawyer since it's the LLC who owns the property, not you. (Not sure if it's a big deal to you though)
pomelo / 5524 posts
We've never thought about doing this. We have DH's condo that he bought before we were married that we rent out. So we only have one rental right now.
eggplant / 11716 posts
@littlek: @oliviaoblivia: Would you form an LLC as a sole proprietor or as a corporation? Any pros or cons to doing it either way?
pineapple / 12793 posts
@Anagram: LLC is kind of a hybrid between corporate organization and sole proprietorship.
ETA: are you referring to your tax status?
eggplant / 11716 posts
@oliviaoblivia: haha...I don't know. Now I'm confused! I was reading this website http://www.nolo.com/legal-encyclopedia/texas-form-llc-31745.html and it was saying,
"6. Comply With Other Tax and Regulatory Requirements
Additional tax and regulatory requirements may apply to your LLC. These may include:
EIN: If your LLC has more than one member, it must obtain its own IRS Employer Identification Number (EIN), even if it has no employees. If you form a one-member LLC, you must obtain an EIN for it only if you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online EIN application on the IRS website. There is no filing fee."
eggplant / 11716 posts
@2PeasinaPod: @MUI831: @yoursilverlining:
This is what I've been reading:
http://snipesproperties.com/put-rental-property-llc/
http://smallbusiness.chron.com/advantages-using-llcs-rental-properties-25717.html
http://www.biggerpockets.com/renewsblog/2013/08/17/rental-properties-llc/
nectarine / 2085 posts
What tax benefits are you looking to achieve? I'm assuming you aren't a real estate professional (that's a defined term and you'd know it if you are) and that you're in the U.S. If you have losses on the rental, you may get a deduction for those if the property is held by an LLC, but unless you've got a multiple-member LLC, any income will flow through directly to you. I would consult an accountant if your primary motivation is taxes.
eggplant / 11716 posts
@honeybear: not just taxes, although that's part of it. I'm also looking into it for protection of personal assets. I already have a decent umbrella insurance policy, but am trying to parse out the pros and cons of starting an LLC for rentals too. We may be expanding our rental properties in the next year or so and I like to do a lot of research in advance. I'm all about saving some $$ and protecting my ass at the same time, haha. But seriously.
pomelo / 5524 posts
@Anagram: Thank you! I'm going to take a look with DH when I get home tonight.
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