As an attorney, I know that an LLC has several advantages. These advantages extend to the formation benefits of LLC for rental housing properties.
The following information will allow you to see how these advantages can stack up for real estate rental owners.
I can assist you anytime you want further details. Email: sam@mollaeilaw.com for additional information and a consultation.
- Limit Your Personal Liability
- Separate Your Rental Properties
- Pass-through Taxes
- Better Budgeting
- Realize the Benefits of LLC for Rental Property
- Benefits of LLC for Rental Property
- Benefits of LLC for Rental Property Profits
- What Happens Next?
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4 Benefits for LLC for Rental Housing Businesses
Do you own rental properties? The benefits of LLC for rental housing owners are tremendous. Let’s take a look at the perks below.
However, before we proceed, keep in mind that creating an LLC differs by state. That is why you need an attorney’s assistance to make sure you are doing everything right.
Again, you can email; sam@mollaeilaw.com anytime day or night.
1. Limit Your Personal Liability
Whether you create an LLC for a business or rental property, you reduce personal liability. That means if someone files a lawsuit against you, they cannot go after your cars or home.
Only the assets owned by the LLC are at stake in this case. Therefore, only your business or rental property is involved in a lawsuit, not your personal assets or savings.
2. Separate Your Rental Properties
When you create an LLC for rental properties, you can divide them from each other. This is great if you own several properties, as doing so insulates them from any possible liability claims.
If you have each rental property under a separate LLC and someone files a lawsuit, they cannot go after the other properties. By forming a separate LLC, you can effectively separate and safeguard each property.
3. Pass-through Taxes
If you own rental LLC properties, the taxes you owe do not affect your business but pass through to you, the owner, on your personal tax return. This reduces the business income tax you pay.
4. Better Budgeting
When you create an LLC for a rental property, you should also sign up for a business bank account This is important, as the bank account separates your personal costs from your business/rental expenses.
To register for a business account, you will need to acquire an employer identification number or EIN. The EIN represents your LLC when filing business taxes while a social security number (SSN) is used for personal taxes.
Taking this step makes it easier to claim your business deductions or expenses as well. A separate business bank account clarifies what costs are related to your rental properties.
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Who Can Realize the Benefits of LLC for Rental Property Profits?
Any landlord can realize the benefits of LLC for rental property holdings, whether he or she has one property or several. In both cases, you will receive pass-through taxation and protection from legal claims.
Mollaei Legal Tip: The formation of an LLC can be especially helpful if more than one owner owns rentals. When an LLC is created, you also can draw up an operating agreement. While this agreement is not mandatory, it is legally advisable. The operating agreement reviews the responsibilities and the rights of each LLC member. Therefore, each member understands his or her role in the formation of the company.
Create the LLC Before You Buy a Rental to Enjoy the Benefits of LLC for Rental Property Ownership
To ensure you experience less hassle and better enjoy the benefits of LLC for rental property profits, you should create an LLC before a property purchase. Doing so will prevent the following problems:
- Having to notify the holder of the mortgage that you plan to transfer title to your LLC.
- Paying additional closing costs if the mortgage holder decides to close the loan in your name.
- Having to notify tenants that an LLC owns their residence
- Updating rental lease agreements
- Having to pay additional taxes, such as a title transfer tax
When you form an LLC first, you can purchase the rental property under the LLC and the property deed will be under the LLC’s name.
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Creating an LLC to Realize the Benefits of LLC for Rental Property Profits
Maybe you already own one or more rental properties. You want to create an LLC to realize the benefits of LLC for rental property profits. If so, you need to transfer your deed to the LLC you create. This is known as a transfer title.
A property title or deed outlines the legal rights for ownership. A single person or several individuals can hold these rights. If you don’t create an LLC, you or any other owner is personally liable for any claims made against the property.
Transferring the Title to an LLC
To transfer title to an LLC, you need to draft a Quit Claim Deed and file it with the Country Clerk. You can edit any information on previously recorded deeds by filing a Quit Claim Deed.
To proceed with the transfer, contact me anytime to get started. Begin today. Just email sam@mollaeilaw.com to set up a consultation.
How a Title Transfer May Impact Financing
If you decide to transfer your real estate title to an LLC and have a mortgage in your name, it will not match the name featured on the deed.
This may compromise your foreclosure right for your legal tender. Before you transfer a title then, you need to check with the lender if you can proceed.
If you can transfer the title, despite a current mortgage, find out the contingencies. For example, transferring the title may increase the interest rate on the loan or you may have to pay an assumption fee.
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What Happens Next?
To realize the benefit of LLC for rental property ownership, you need to secure the services of an experienced business attorney. Contact me with your inquiries today. To get started, email sam@mollaeilaw.com now.
If you are an owner of rental properties and do not currently have an LLC in place, I urge you to form this type of company. Not only will you be legally protected, you will save a great deal of money.
By enjoying pass-through taxation and keeping your assets separate, budgeting is easier which also increases your revenue.
Book A FREE Call To Form Your LLC Online Here
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