I'm still about 6-12 months away from starting my search for my first rental property but I have some questions.
1. Should I establish a formal business, (LLC or other business type)
2. What business structuring would give me as the owner the most liability protection, if any?
3. Would simply running all finances through my personal account versus a business account have any affect on my liability?
Any and all help is appreciated. Thank you!
Hello @John Cummings and Welcome to Bigger Pockets!
Regarding an LLC and protections, here are some blog articles you should read:
I would advocate NOT co-mingling your personal funds with your business funds. Keep everything separate and you will be much happier with the bookkeeping come tax time.
@Dawn Anastasi Thank you for your reply and those articles you linked were helpful. From one of the articles it suggested getting an umbrella insurance policy since it would offer about the same protection as an LLC. That sounds like a good idea.
But to get back to what you said about not co-mingling personal assets with rental assets would you then suggest still establishing a business (DBA) as possibly a sole proprietorship instead of an LLC? Not as a form of protection but more as a way to separate the finances?
Or should I simply hold off until I'm a month or two away from purchasing a rental property before I establish a business relationship?
I have rentals in my personal name. I have a separate personal account at a completely different bank. Keeping it separate has been easy.
keep in mind starting a llc is really cheap. If you have multiple properties I think this would be the way to go.
I keep it all separate in my own name with separate bank accounts. I find a LLC is too much hassle. I just take a large $ 1.0 MM+ umbrella policy out instead.
Read the comments on here too. Very helpful for deciding an entity structuring strategy.
I wouldn't worry about it if you are that far off time wise. My llc was 150 and took ten minutes. All of the money flows through the company, but the mortgaged properties are in my personal name.
I did it for liability protection, privacy, and public perception. Even though it doesn't mean a whole lot, outsiders give a lot of weight to formal structure
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