Should I set up an LLC?

My husband and I bought a three-family house last month, and we’re going to rent out the first floor. Do most people who do this set up an LLC, or just keep separate accounts? Thank you in advance.

lkpe

in Real Estate - Rentals 12 years and 9 months ago

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bobbyisagirl | 12 years and 9 months ago

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Another thing to consider is that if you own an LLC company should you or your husband become unemployed you are will not be entitled to unemployment benefits. I would consult with your accountant for all the pros and cons before considering this. I think you’ll find it’s not worth the hassle and umbrella libility is probably the way to go. Good luck.

slopefarm | 12 years and 9 months ago

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We don’t have an LLC for the rental in our 2-fam. Accountant can schedule separately as a building anyway, and offset costs against rental income. Yeah, make sure homeowner liability umbrella is good and require tenants to get renter’s insurance as a lease term.

lkpe | 12 years and 9 months ago

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Thanks, everyone, I appreciate the advice. Sounds like an LLC would just complicate our lives, so going to skip. I think we’re covered under our homeowners insurance too.

zampano | 12 years and 9 months ago

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BTW, as the property must be transfered, your lender is going to be involved. They may want a few dollars, force you to refinance ornot care at all.

jeanmarine2 | 12 years and 9 months ago

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I’ve asked an accountant myself as to property I own, and am not rushing out to own through an LLC (yet); here’s my take; If you already purchased in your own names, you already have individual risk anyway, and there’s a cost associated with switching over, so check whether it’s worth it and in the meantime, seriously consider getting umbrella liability insurance so you are covered for major lawsuits if and when they happen; you could always set up an LLC and transfer to the LLC at some point but there will probably be a cost associated with that, so check with an attorney what the transfer costs would be, and with an accountant what the tax benefit of the LLC would be.  (as for limited liability, yes it’s good in theory to own through an LLC if you own properties but if you just own the one property, I agree with the other poster that it might not be necessary; and a single-member LLC may be a little less protected against liability if a court finds that the LLC was really just the single member, and with a husband/wife LLC (2 members) I don’t know if that would be different.  Definitely ask a lawyer for more specifics.

Bklnite | 12 years and 9 months ago

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A common use of an LLC in RE is to hold title to property in order to protect your personal assets from liablility associated with a rental property. (I have an LLC with a partner and the LLC owns an 8-unit building). It’s not common for people who own a home with 1 or 2 rental units to set up an LLC. If the house & the mortgage is in you and your husband’s names, an LLC won’t serve the purpose of limiting your liability.

no-permits | 12 years and 9 months ago

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do you own the building in an LLC already? if so, then it makes sense to have rent paid to the LLC and keep separate accounts from your personal. if you own the building as individuals, then the rent should be paid to you (in your personal account or in a separate account for the building). don’t overthink it or make extra paperwork for yourself.