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Quan Dao
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Forming LLC & Deed question

Quan Dao
Pro Member
Posted

Hello everyone, I am starting my short term rental journey. Currently, I only own one property with a mortage. Should I open an LLC or should I run it as individual? Furtheremore, If I open an LLC, am I required to change the deed to the LLC? Currently I have a mortage and it seems like a lot of work, if I have to change the deed. Please educate me everyone. Thank you so much! ❤️

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Frank Chin
  • Investor
  • Bayside, NY
1,365
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1,818
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Frank Chin
  • Investor
  • Bayside, NY
Replied
Quote from @Quan Dao:

Hello everyone, I am starting my short term rental journey. Currently, I only own one property with a mortage. Should I open an LLC or should I run it as individual? Furtheremore, If I open an LLC, am I required to change the deed to the LLC? Currently I have a mortage and it seems like a lot of work, if I have to change the deed. Please educate me everyone. Thank you so much! ❤️


No. An LLC will do nothing for you such as providing asset protection and shielding you from lawsuits. If you have a mortgage in your name, you cannot change it to the LLC. If the bank finds out, they can terminate the mortgage. Just leave things alone.

If you don't deed it to the LLC, then it's a useless LLC costing you fees for no reason.

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Quan Dao
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Quan Dao
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Replied
Hello Frank, thank you so much for your reply and knowledge. So from what I understand from you I would have no protection, however, would the LLC benefit me for any tax benefits? Could I do itemized deduction on a schedule E as an individual? Thank you so much for your time!
Quote from @Frank Chin:
Quote from @Quan Dao:

Hello everyone, I am starting my short term rental journey. Currently, I only own one property with a mortage. Should I open an LLC or should I run it as individual? Furtheremore, If I open an LLC, am I required to change the deed to the LLC? Currently I have a mortage and it seems like a lot of work, if I have to change the deed. Please educate me everyone. Thank you so much! ❤️


No. An LLC will do nothing for you such as providing asset protection and shielding you from lawsuits. If you have a mortgage in your name, you cannot change it to the LLC. If the bank finds out, they can terminate the mortgage. Just leave things alone.

If you don't deed it to the LLC, then it's a useless LLC costing you fees for no reason.


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Frank Chin
  • Investor
  • Bayside, NY
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Frank Chin
  • Investor
  • Bayside, NY
Replied

@Quan Dao

Here is an article on taxation of an LLC in your case. From the discussion, you'll be taxed most likely taxed as an individual. So you'll add a level of complexity and expense for no reason at all.

LLC Taxation

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Quan Dao
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Quan Dao
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Thank you so much Frank. I wish you great health and happiness. 

Quote from @Frank Chin:

@Quan Dao

Here is an article on taxation of an LLC in your case. From the discussion, you'll be taxed most likely taxed as an individual. So you'll add a level of complexity and expense for no reason at all.

LLC Taxation


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Quan Dao
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Quan Dao
Pro Member
Replied
One more question for you, Mr. Frank. When should a person open an LLC? I have always thought LLC would protect assets from litigation. What does LLC or c corp or s corp really protected from then? If the ceo will get sued anyways?

Quote from @Quan Dao:
Thank you so much Frank. I wish you great health and happiness. 

Quote from @Frank Chin:

@Quan Dao

Here is an article on taxation of an LLC in your case. From the discussion, you'll be taxed most likely taxed as an individual. So you'll add a level of complexity and expense for no reason at all.

LLC Taxation



User Stats

1,818
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Frank Chin
  • Investor
  • Bayside, NY
1,365
Votes |
1,818
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Frank Chin
  • Investor
  • Bayside, NY
Replied

@Quan Dao

I owned a number of MF rentals some years ago. I also have an S Corp., C Corp, and an LLC for an active business I bought.

The LLC was not used as a shield. It's used to form a barrier from one business to another. In the active business, I have employees. I'm required to provide workman's comp, unemployment insurance among other things. The state does on-site inspections of business. If I don't separate this active business from the rentals, they can go into who I hire for my rental business, what are the locations etc. Before Obamacare, it cost me $2,000/month for private health insurance. But if I bouget it under the LLC, by law I have to buy it also for my employees. Thus, I formed the C Corp management company to pay for my health insurance as I cannot charge it off as a rental expense schedule E. The management company paid my insurance and charged me a management fee which can go onto the schedule E as a rental expense.

Get the picture?

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Quan Dao
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Quan Dao
Pro Member
Replied
I see the hole clearly. Thank you so much.

Quote from @Frank Chin:

@Quan Dao

I owned a number of MF rentals some years ago. I also have an S Corp., C Corp, and an LLC for an active business I bought.

The LLC was not used as a shield. It's used to form a barrier from one business to another. In the active business, I have employees. I'm required to provide workman's comp, unemployment insurance among other things. The state does on-site inspections of business. If I don't separate this active business from the rentals, they can go into who I hire for my rental business, what are the locations etc. Before Obamacare, it cost me $2,000/month for private health insurance. But if I bouget it under the LLC, by law I have to buy it also for my employees. Thus, I formed the C Corp management company to pay for my health insurance as I cannot charge it off as a rental expense schedule E. The management company paid my insurance and charged me a management fee which can go onto the schedule E as a rental expense.

Get the picture?