LLC/LLP Benefits
As first time landlords, we’re discussing with our accountant about setting up a corporation. Has anyone else done this and were the benefits worth the time and filings?
As first time landlords, we’re discussing with our accountant about setting up a corporation. Has anyone else done this and were the benefits worth the time and filings?
we looked at this too but our lawyer told us that you can’t assign your rights in the property after you take out the residential mortgage so the LLC was bascially out. I wonder what others have done?
LLC will protect your assets in case of a lawsuit. Other than that I wouldn’t recommend it as it makes getting a residential mortgage next to impossible.
Adam Dahill
adahill@wcslending.com
regardless of how you decide to go about this, the best thing to do is to buy plenty of insurance = Let the insurance do the work in case you get sued…
Also
If you get income from the property, do not use an INC:
NYC will tax you an additional 8% or so on the income (NYC corporation tax.)
An LLC is a way to shelter other assets you might have. LLCs are not very expensive to setup, and have low operating expenses (the biggest expense is probably the accountant:-)
the difference between a LLC, an LLP and a subchapter S corporation…and individual ownership is basically a tax and liability question as well as who is liable and for how much.
Also NY City(rent control rent stabilization) doesn’t allow anyone but an individual owner to take over for personal use an apartment from a rent regulated renter.
So its a long answer it depends on the building size and some other issues.
LLC and LLP are taxed like partnerships- not corporations but a sub s corp is also only taxed once BUT NYC didn’t in the past recognize sub s corps(I think the law was changed but I am not sure)…
Finally if you plan to owner occupy your house the federal personal tax exemption for owner occupied housing MAY not apply to a corporation.
LLC and LLP and sub s for liability purposes are treated as corporation(no personal liability) but in general you will maintain enough insurance so this won’t be an issue anyway…
LLC
Discussed on a previous forum post http://bstoner.wpengine.com/forum/archives/2009/03/creating_an_llc.php
It ran a couple grand when I formed an LLC, but maybe can be done for less. An LLC (limited liability company) is not a corporation, though it shares things in common with corporations and with partnerships. Main thing is: if the owner of the apartment building is an LLC and gets sued, the members aren’t personally liable – they can only go after LLC’s assets (the building). Also, if you get sued personally, someone can’t go after assets owned by the LLC.
You can get a loan as an LLC for a commercial mortgage (which is what you generally have to do anyway for 5+ family), but you can’t get a residential (fannie backed) mortgage for a 1- to 4-family as an LLC.
Never take legal advice from an accountant and accounting advice from a lawyer.