Announcement

Collapse
No announcement yet.

Need Advice On Personal Property Managed By LLC?

Collapse
This topic is closed.
X
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • Need Advice On Personal Property Managed By LLC?

    Hi All,

    New to the RE area in TX. I have properties with mortgages, ins, and
    title in my personal name. I've created a single member LLC.

    For tax and legal purposes, is it wise to utilize the LLC in a property
    management role? All mort. payments, taxes, ins, repairs, maintenance,
    rent collected, and etc would be handled through the LLC?

    Should I provide a contract between my LLC and personal name stating
    all transactions and business will be handled by the LLC? Provide
    montly invoices too?

    How would I get the profit back from the LLC back into my personal
    name? Or should i leave any income in the LLC?

    Eventually, sometime in the future I would like to have the properties
    in the LLC.

    Thank you for your advice.

    regards,

    md


  • #2
    Need Advice On Personal Property Managed By LLC?


    [email protected] wrote:
    Hi All, New to the RE area in TX. I have properties with mortgages, ins, and title in my personal name. I've created a single member LLC. For tax and legal purposes, is it wise to utilize the LLC in a property management role? All mort. payments, taxes, ins, repairs, maintenance, rent collected, and etc would be handled through the LLC? Should I provide a contract between my LLC and personal name stating all transactions and business will be handled by the LLC? Provide montly invoices too?
    I've looked into putting my properties into an LLC, so I've struggled
    with these same problems. It seems hard to hide the equity in property
    ownership from liability claims by tenants (slip and fall,
    electrocution) or contractor's mechanics liens.

    What LLC can do is separate assets from each other. If each property
    is in a separate LLC then a claim against one cannot claim against
    another LLC or owners other personal property. In CA(lifornia) LLCs
    are $800 a piece a year, so this is a chunk of change. $800 buys a lot
    of umbrella coverage. Talk show host Ray Lucia often mentions Delaware
    series LLCs where one LLC can be split into legally separate parts.
    Might be worth looking into if LLCs are as expensive as in CA.
    Experienced contractors may not want do business with an LLC. They
    want repairs authorized by the property owner. As landlord and
    property owner I've had to sign off on repairs/upgrades that my tenants
    wanted to pay for because contractors won't do work unless they can
    place a lien on the property. Apparently they are more into
    "contracts" than repairs. This is why they aren't called "repairers".
    Using an LLC for property management sounds fine, but you need to do
    more for asset protection. Lots of debt on a property (big mortgage)
    is also a form of asset protection. Nothing to sue for.

    Ideally you would want two entities. One is asset rich and uses a land
    trust to hide the real owner. The other is asset poor and deals with
    all outside tenants/contractors. The asset poor entity leases the
    property from the asset rich entity. Any claim against the asset poor
    entity is judgement proof. Unfortunately it is hard to avoid "piercing
    the corporate veil" if all these entities are owned by the same person
    and are really just paper. Then again, lawyers might tire at pealing
    away the layers of the onion.

    Land Trusts can hide the beneficiary, so people sometimes use this to
    hide themselves from lawsuit happy tenants/lawyers.

    I don't think banks will lend money to an LLC unless you sign
    personally on the loan. The argument is that they are just as protected
    by separation of assets as the owner is. I suppose they are happy to
    take payments from a property manager. Once the property manager can
    sign on behalf of the property owner, the property owner is entangled.
    How would I get the profit back from the LLC back into my personal name? Or should i leave any income in the LLC?
    LLCs can be set up as a passthrough entity. You just fill out Schedule
    E. Even the owner occupied capital gains exemption if you move into a
    rental for 2 years.

    Just things to think about. Always consult a professional lawyer/CPA.

    Good Luck

    Comment


    • #3
      It is really up to you. If you are just you, you could draft an agreement with the LLC but when it comes to taxes, it would be more of a pass thru entity. If you are seeking to operate more like a corporation, that is a different tax structure and set of requirements and more of a formal separation from the personal. I think you have to sit down with your tax professionals and attorney to figure out what is best for you. You also need to do your homework with prospective tenants to screen tenants to make sure you are not getting litigious happy tenants.

      Comment

      Working...
      X