If the rental property is under my name, can I collect rent under the LLC business account?

Tax, Legal Issues, Contracts, Self-Directed IRA 26 Replies

The deed is under my own name since I am personally liable for the loan.

Can I have my tenant make the rent payment into my LLC business account? thanks

Yes, you can do that. You should also be able to deposit checks made out to you directly into your LLC bank account. I have a property owned in one LLC, all checks are made out to me and I deposit to an account with a different LLC. I've never had any problems.

If you're worried about liability then money-handling isn't going to matter if the property isn't deeded to the LLC.

-Michael

Michael Seeker MBA | http://www.Renting502.com

I do this too, in order to keep everything related to the property completely separate from my personal funds.

Dawn Anastasi, Core Properties, LLC | http://www.coreprop.biz

Why do you have the LLC? I ask this since most LLC theories are to limit liability is a buisness or property. If you own the property in your personal name then liability rest on you for the building.

If my name is on the deed instead of the LLC, can I sign the lease contract with the LLC name instead my name and have the tenants deposit the monthly rent into the LLC business checking account?

Originally posted by Michael Siekerka:
Yes, you can do that. You should also be able to deposit checks made out to you directly into your LLC bank account. I have a property owned in one LLC, all checks are made out to me and I deposit to an account with a different LLC. I've never had any problems.

If you're worried about liability then money-handling isn't going to matter if the property isn't deeded to the LLC.

-Michael

Eve Zhao - You can put whatever you want on the lease and put the money wherever you want (or have the tenants do so). The only benefits of doing this are

1. you might sound slightly more professional (but much less personable)
2. it may be easier to keep your personal finances separate from your "business" finances

Keep in mind that taking this approach does not limit your liability in any way. If a tenant were to get injured because of owner neglect, they'd still be able to sue you, the owner for whatever their lawyer(s) would like to go after including personal assets.

Michael Seeker MBA | http://www.Renting502.com

I would definitely get title out of your name.
QC it to the LLC & get large $ liability ins on it
But hold the mtg note assuming it's free & clear in your name to strip the equity.

I don't see why you couldn't have a management agreement between yourself and your LLC. Your LLC would manage the property for you, sign the lease, and collect rents. The LLC would then pay the owner (you) anything left after expenses.

I caught some flak yesterday about not being positive with new folks, so here is my positive spin.

Sure, you can do all of that!

Now, I'll work my way from the bottom up;

Rob, You can do that, so long as your state real estate commission allows it, if your LLC is a seperate entity from you then your company doesn't own the property. For a company to have a property management agreement to manage properties for others, a real estate license can be required. See response to Eve.

Pat, I was about to vote you up on that until I read about the equity stripping ploy, bogus notes will be shot through like Grant going through Richmond.

Eve, title is not in the LLC name and it has no rights to lease property it has no interest in, your lease is invalid. Lease the proprty to the LLC and then do a sandwich lease, having the LLC sub-let the property.

Michael, yes, you can deposit checks in your name since the bank accepts the deposit, the bank is not responsible for you to do anything correctly. Comingling funds goes in both directions, depositing personal money in the LLC as income can also bring questions of why income from a personally held property is being washed through a company, money laundering for any tax advantage, is that the reason? Or, is it being wash through to show income to an LLC that is personal income for financing purposes?
Again, use a lease to the company and sub-let, if checks are made out in your name, use an endorsement on the back of the check: Pay to the order of XYZ, LLC., then endorse the check by the LLC and deposit it.

Will, good point, the liability goes to the one in title. If the company provides some service or function that causes an issue, both the company and individual are at risk. The company is still at risk by holding property in your name as you are liable and the company is your personal asset since you own it.

Dawn, you're in the same boat, sub-let the property.

Wheeew, I'd say I got thrung that on a more positive note... (LOL) :)

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Thanks for the detailed response @Bill Gulley . I've always seen your posts as positive and most helpful. I must've missed the negative ones lol!

Originally posted by Bill Gulley:
Rob, You can do that, so long as your state real estate commission allows it, if your LLC is a seperate entity from you then your company doesn't own the property. For a company to have a property management agreement to manage properties for others, a real estate license can be required. See response to Eve.

In my state, it would be perfectly legal. It's also legal to have an unlicensed person who works for you to manage YOUR property. The only time a license would be needed is if someone os collecting a fee to manage property owned by another person.

Pretty much the way it is in all states, employees don't need a license. A company can not be an employee. :)

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Originally posted by Rob K:
Originally posted by Bill Gulley:
Rob, You can do that, so long as your state real estate commission allows it, if your LLC is a seperate entity from you then your company doesn't own the property. For a company to have a property management agreement to manage properties for others, a real estate license can be required. See response to Eve.

In my state, it would be perfectly legal. It's also legal to have an unlicensed person who works for you to manage YOUR property. The only time a license would be needed is if someone os collecting a fee to manage property owned by another person.

Yes, there are two entites at play (LLC, individual). In many (most?) states, like NC, the definition of broker includes words like "a broker is ...an person or entity who for a compensation or valuable consideration or promise thereof ..." that allow an "out" for cases like Eve's. I have on occasion shown, advertised, and even once helped in negotiation for other people's property..., but without consideration (explicit or implicit) and without a license. Not an issue in my state, but I think this isn't true everywhere.

Are there any tax benefits of leasing through LLC, e.g. expense deduction and real estate research?

Reviving an old post here.  I recently purchased a property and title is in my name (favorable 30 yr. fixed rates).  @Bill Gulley had a great idea about a sandwich lease (leasing from me to my LLC and then the LLC sublets to the ultimate tenants).

I wanted to ask if I need to notify my insurance company that my LLC is the landlord per the rental agreement or if it doesn't matter to the insurance company since I'm still on title. @Dawn Anastasi - did you end up setting up sandwich leases and if so, do you have to involve your insurance company to make sure the LLC that is acting as the landlord is also on the policy?  I'm guessing the insurance company doesn't need to be notified since nothing is changing with the title.  Thanks for any insight.

Hi William, that must have been an old thread, I don't recall the topic, as to insurance, the LLC cannot be listed as an insured on a personal policy, the LLC is a commercial entity and will require a commercial insurance policy.

Let me say too, that this arrangement has caveats;

State laws vary, this set up should be run past your attorney! 

The LLC needs to profit, having a business purpose. This is an "objective" test as to sham transactions, there must be a business purpose "subjective" test, a reason the LLC was formed, that might be to better market a property through advertising, other than some tax benefit or attempt to hide out or to engage in "self dealing" as the owner. A manager managed LLC might be the better option, with an unrelated manager.

The issue to overcome is leasing a property to yourself, you need to see your attorney and tax advisor, the business goal is to sub-let and lease. 

In some states, any entity leasing property may be subject to licensing laws, exceptions are common when the LLC is closely held by the property owner, but check.

Liability protection may not exist as you might think with a closely held, member managed, LLC, especially if the LLC has no assets and is not sufficiently funded.

While I mentioned this, it's not a DIY strategy, see your attorney and tax advisor. :)  

   

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Sorry - newbie who couldn't get the @ feature to work - see below, thanks

Are there any tax or personal liability benefits from doing this sandwich lease (lease to LLC then to tenant)? My insurance guy recommended that I do this setup to protect myself (I am about move out of my duplex in Texas and rent out both sides), but I'm not so sure it will help. Since the mortgage/deed is in my name, what liability protection would sub-leasing through my LLC provide?

Same question as far as taxes go - mortgage and deed in my name, how will sub-letting through LLC help?

More information about my situation - I have an S-corp LLC setup that I used last year for consulting, but no longer need, that I could easily convert for use in this situation if it was beneficial. I'm just not seeing it being worth it from a tax or personal liability side to deal with the hassle (quarterly reporting, etc) and have to pay the LLC manager, the payroll taxes and accounting fees, etc. - are there any big personal liability or tax implications that I seem to be missing?

Obviously if it is a good idea to go through the LLC, I will meet with my attorney and accountant to ensure all is setup correctly.

I would love to have @Bill Gulley weigh in.

Thanks,

Zach Hodge

Shouldn't be an issue.

However, I wonder why so many people mess around with LLCs when you can pickup $2 million in umbrella coverage for peanuts (less than $50/month). Most umbrellas cover litigation costs as well making them super useful in the event a lawsuit is actually filed.

Best
Pete

There is no real advantage with a closely held entity, it can be a bit of eye wash where someone thinks they must go through an entity, initially they may not know the structure and give up. Entities are for business reasons, otherwise just a single family home can be held personally for less headaches and money and you can represent yourself, like an eviction. :)

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

As an added note, I have read a few questions and comments missing the finer point that an LLC is also a "disregarded entity" with the potential to elect to be taxed as an s-corp.. As a disregarded entity that means for tax purposes all profits and loss's are placed to the ownership as personal. If it is a person who owns the LLC, and than personally owns a property deeded in there personal name, tries to "lease" it to the LLC and than have the LLC "sub-let" the property, on paper it boils down to renting to yourself. Reporting of rent like that as expenses at minimum will earn the attention of the IRS.

Bill Gulley

Bill Gulley

Congrats @Bill Gulley ....

A POSITIVE POST! Bookmark this one folks...you may not see another one for a LONG LONG LONG time!

:)

My FRIEND Bill is a vast source of knowledge regardless if we agree or disagree with his posts! 

John Thedford, Next Home Advisors | 239‑200‑5600 | http://www.capehomebuyers.com | FL Agent # SL3098153

@Pete Fiannaca. Where can you get a 2 million dollar umbrella liability policy for less than $50? I haven't found that pricing available.

Originally posted by Account Closed:

@Pete Fiannaca. Where can you get a 2 million dollar umbrella liability policy for less than $50? I haven't found that pricing available.

 I have a $1 million one for $208 a year through Safeco.   Just got my bill 3 days ago. 

No company avatar mediumBrian Mathews, Brian's Heating and Cooling | [email protected] | 512‑350‑8704 | http://www.brianac.com