Investor · Stockdale , TX · Member since 2015 · 89 posts · 28 votes
Right now we have a separate business checking account (a sole proprietorship) for receiving payments from our property manager. However, I read a post (which I can't find anymore) that seemed to suggest it was better to create an LLC to receive payment from a property management company. If this is true, why? Some sort of legal protection?
Investor · Leominster, MA · Member since 2011 · 1k+ posts · 589 votes
11y
The main reason people give for setting up an LLC is asset protection. I dont think thats reason enough. Do you have liability insurance? You should be fine. Of course everybody has a different situation. Figure out your net worth. Cover that with the insurance.
Edmond, OK · Member since 2012 · 456 posts · 270 votes
11y
To answer original question, my property manager deposits rent from my tenants into my LLC bank account. I entered into agreement with my property manager as an LLC. Property manager sends me 1099 to the LLC as payee
The post I can no longer find seemed to indicate that if you were self-managing, it wasn't necessary to setup an LLC (although up to your personal preference), but that if you were using a property manager, it was recommended to setup an LLC. Maybe something related to protecting yourself if someone sued your PM in relation to one of your properties? Perhaps it's really more of a question for an attorney.
Edmond, OK · Member since 2012 · 456 posts · 270 votes
11y
@Andy H. a sole proprietor LLC can be setup via Legalzoom for a few hundred. During tax returns time, the LLC is simply a pass through entity and is not named on my tax filings.
An LLC lets me appear like a true business with its own bank account, SSN like ITIN issued by the IRS, it's own credit and debit card. So, when I have a rental related expense for gas or meals or weed killer purchase from home depot, I use its own credit card and am able to track my expenses related to the business easily.
Keeping my LLC active every year with my state by ding an Annual Certifucate costs me $100 dollars and it is done online.
Investor · Leominster, MA · Member since 2011 · 1k+ posts · 589 votes
11y
@Andy H. operating as a sole proprietorship without being an LLC can be setup by going to the bank and opening a separate bank account for my rentals. During tax returns time, I file a Schedule E for each property.
As an investor I am a true business with my rental properties having their own bank account and I don't need a separate tax ID. My business does have it's own debit card so when I have a rental related expense for gas or meals or weed killer purchase from Home Depot, I use its own debit card and I'm able to track my expenses related to the business easily.
Keeping myself active every year costs me nothing except eating right and being somewhat healthy. I have general liability policy for all of my asset protection and that can be set up online and costs a lot less than maintaining an LLC.
Investor · Rosebud, AR · Member since 2014 · 133 posts · 49 votes
11y
I use llc's for business and personal rental properties. But I learned the hard way during litigation on a case. During litigation, Educations get expensive.