Forming My Property Management LLC for liability and asset protection.
I own under my name over a dozen rental properties (with loans) in Florida which I effectively manage from Europe without an issue. While I have HO6 insurance on them, I am considering creating a My Property Management LLC to manage all aspects of these rentals (maintenance, collect rents, etc.) in order to achieve additional liability protection. Has anyone done this? Considering I would be the sole employee of this company which manages all operations from abroad, which also happens to be the sole property owner of these rentals, would it meet asset protection and liability protection benefits? Has anyone done this? I cannot move title for each property to a LLC as PNC will not allow it (due-on-sale clause). I read about the Land Trusts and it seems way too much cost and overhead compared to a My Property Management LLC. Any feedback would be appreciated. Thanks in advance! :)
#1 All Forums Contributor
- Investor
- Northern Virginia
@Alain R.
Once you get a property management company then that company will need to get license and insurance etc and if it gets sued typically the company and people (you) get sued
If you have loans on these properties what on gods green earth could you be sued for that isn’t covered by your insurance policy?
#2 Managing Your Property Contributor
If you can't transfer ownership of your properties to an LLC, then an LLC doesn't provide you any liability protection.
The only reason for you to form an LLC would be as a Management LLC that would allow you to open bank accounts and also give you further separation between your personal and business operation for IRS reporting.
Thank you Chris and Michael for your reply, I do appreciate it, you bring valid points.
Since I am abroad, I coordinate all operations from abroad, I rely on a good set of contractors and a family member that executes all in-person activity requests from me (show the units, verify work pending/done, etc) which I pay with a 1099. Considering I am not the one doing the actual work that could cause a liability, I figured the PM LLC would give me that additional advantage. IMO, there are other clear factors for which the PM LLC would benefit me, such as converting the rental income from passive to active and making it eligible for the IRS Foreign Earned Income Exclusion as well as a Solo 401k and SEP IRA, while this would add the self-employment tax, it would drop my taxable income considerably. My intent is to "defer" as much income as possible. I am also considering modeling this PM LLC as a C-Corp to see if I could retain earnings (keep them at the C-Corp without distribution) and use those earnings for future additional acquisitions owned by the C-Corp.
Chris, AFAIK, in Florida, I understand that if the properties are owned by me, I do not need a license, and insurance is optional.