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LLC vs umbrella policy for rentals
Posted on 10/7/20 at 7:13 am
Posted on 10/7/20 at 7:13 am
Looking to get into rental properties and would like to know which route and why did those of you that invest in rentals go. I already have a 1 million umbrella just curious if the extra asset protection from an llc is worth it. Looking at purchasing three units that already have tenants then adding one to two a year from there.
Posted on 10/7/20 at 7:36 am to bayoudude
Put each unit into a separate LLC.
Posted on 10/7/20 at 7:40 am to bayoudude
I just use an umbrella.
Much simpler with record keeping.
Much simpler with record keeping.
Posted on 10/7/20 at 7:49 am to jfw3535
quote:
separate LLC
This. It’s also easier for bookkeeping and transactions. Individual LLCs are owned by a parent/holding co.
Posted on 10/7/20 at 8:01 am to Rendevoustavern
problem with this is that an S corp cannot own another S corp. So, you'll end up just owning each LLC S corp individually, unless you go C Corp, which would be "double taxed"
Posted on 10/7/20 at 8:39 am to bamaswallows
Just trying to keep my taxes as simple as possible but keep myself protected. Want to get a plan in place before I make offers in these properties. Any of you been sued by a tenant?
Posted on 10/7/20 at 8:40 am to Rendevoustavern
quote:
It’s also easier for bookkeeping and transactions
You can easily set-up just about any accounting software to track all expenses on a single line for tax purposes, but then have "class codes" for each property so you can see the P&L by property.
Back to OP, I would form an LLC to hold all property and get a separate umbrella for that LLC.
Posted on 10/7/20 at 8:56 am to bayoudude
There is zero good reason not to form an LLC to hold rentals. You will get the same answer from any lawyer, accountant or financial advisor. It is dead simple and will be taxed as a pass through anyway (assuming you elect to do that).
Posted on 10/7/20 at 9:03 am to bamaswallows
quote:
problem with this is that an S corp cannot own another S corp. So, you'll end up just owning each LLC S corp individually, unless you go C Corp, which would be "double taxed"
Please don't put rental property in an S Corp. This is a terrible idea. There is no benefit to doing this that can't be achieved with an LLC (single member or multi-member). And if you need to move the property out of the S corp, it becomes a deemed sale.
Also, an S corp can own another S corp, if the owned entity elects to become an S Subsidiary.
Posted on 10/7/20 at 9:04 am to bayoudude
quote:
Looking to get into rental properties and would like to know which route and why did those of you that invest in rentals go
In LA, the cost to have separate LLCs for every property is stupid cheap.
In states that charge a large LLC fee (such as California), it's not nearly as easy a decision.
Posted on 10/7/20 at 11:45 am to bamaswallows
Huh? If you put them all in into LLCs, then each LLC is a disregarded entity and taxes get passed through to the individual level, so I don't know how a discussion of S corps and C corps even comes into play.
Posted on 10/7/20 at 3:54 pm to bayoudude
I do tax/asset protection.
S Corp should almost never hold property, should be held as an LLC taxed as a partnership.
LLC and asset protection depends on your state laws. In my state a multi member LLC is pretty much as good as you can get in terms of asset protection. That in combination with an umbrella = you're golden. Most jurisdictions provide zero asset protection for a single member LLC.
S Corp should almost never hold property, should be held as an LLC taxed as a partnership.
LLC and asset protection depends on your state laws. In my state a multi member LLC is pretty much as good as you can get in terms of asset protection. That in combination with an umbrella = you're golden. Most jurisdictions provide zero asset protection for a single member LLC.
Posted on 10/7/20 at 9:15 pm to bayoudude
I say umbrella. It will cover you personally for non rental risk and the premium, which is comparatively cheap, is a write off. The LLC route has extra costs that outweigh the benefits if you consider those same costs as funds for additional insurance.
The liability protection an LLC offers can be diminished to some extent and I’d rather have more insurance than the hope that some judge who is likely friendly with the plaintiff attorney that is suing me knows the law about piercing the corporate veil.
If course, the best bet is to get more insurance and LLC protection.
The liability protection an LLC offers can be diminished to some extent and I’d rather have more insurance than the hope that some judge who is likely friendly with the plaintiff attorney that is suing me knows the law about piercing the corporate veil.
If course, the best bet is to get more insurance and LLC protection.
Posted on 10/7/20 at 10:33 pm to bayoudude
There are a lot of considerations about whether to go the LLC route. But if it is liability from tort claims you are worried about, just make sure you have enough insurance. That shouldn't drive the LLC decision. In fact, the LLC won't offer much protection from tort claims at all. If something were to happen, the tenant or other injured person could easily sue you personally claiming that you were negligent, etc.
An LLC offers protection against voluntary creditors who choose to contract with the limited liability entity. It does not protect LLC members or employees from claims based on their own acts.
An LLC offers protection against voluntary creditors who choose to contract with the limited liability entity. It does not protect LLC members or employees from claims based on their own acts.
Posted on 10/8/20 at 7:03 am to SloaneRanger
Terrible advice. Like truly bad advice
Posted on 10/8/20 at 7:53 am to bayoudude
quote:
Any of you been sued by a tenant?
nope.
Posted on 10/8/20 at 8:33 am to TheOcean
All right smart guy, tell me where I am wrong and show your work. If you own an LLC (i.e. are the member) which owns a rental property and someone gets hurt due to an alleged dangerous condition, you don't think you are getting sued individually? It is no different than an employee like a truck driver getting sued along with the company after an accident. Individuals are always on the hook for their own personal conduct, and in a single member LLC any action of the entity is the action of the individual owner.
Having insurance is the key. People who think using the LLC form shields them from all liability are wrong.
Having insurance is the key. People who think using the LLC form shields them from all liability are wrong.
Posted on 10/8/20 at 8:34 am to TheOcean
quote:
An LLC offers protection against voluntary creditors who choose to contract with the limited liability entity. It does not protect LLC members or employees from their own decisions.
Terrible advice. Like truly bad advice
Not really.
As said OP you want a multi member LLC and the best thing is then umbrella insurance on it.
Placing a property into an LLC only protects your personal assets, the tenant can still sue you for everything that’s in the LLC. So where does that put you?
The problem with rental properties is that usually the owner is the one making the decisions, depending on ‘multimember’ the other members likely are not active. So all the LLC is really doing is protecting your personal assets from contractors and 3rd parties. If you yourself made an ignorant decision that you are sued over they will sue both the LLC and you personally.
This post was edited on 10/8/20 at 8:37 am
Posted on 10/8/20 at 8:34 am to Fat Bastard
LA law makes it pretty easy to pierce the veil on single-member LLC's unless all formalities are followed.
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