All Forum Posts by: Account Closed

@Justin Fox Sufficient insurance coverage is certainly important.

The LLC, if run separately and apart from personal matters, will protect you and cannot be pierced.

If one signs a personal guarantee as part of a business contract then the individual can be personally liable. Personal guarantees subject all personal assets to attachment by creditors. 

Fraud, co-mingling of personal and LLC funds and assets, intentional negligence, misrepresentation, etc. may allow for the LLC to be pierced and subject an individual to personal liability. (Do a Google search for "piercing the corporate veil")

The mortgage is a debt instrument secured by collateral (the property) to ensure that the bank is paid. The mortgage has nothing to do with titled ownership of the property. The deed sets forth the titled owner. 

@Steve Vaughan - You actually said I was "drinking kegs of the LLC kool-aid."

A single member LLC does not need to make an election. He would simply file business taxes on a Schedule C with his 1040.

@Nick Ferguson If it's a high performing property, all the more reason to form a LLC. Don't hesitate to consult with an attorney and a CPA.

@Steve Vaughan is wrong. Talk to a CPA. There's no reason at this stage to operate your "active operations like management" through a S-Corp.  @Annette Hibler is correct.  

I used a S-Corp. for another business and it's a pain. 

You are correct that banks won't give you a HELOC if the property is in the name of the LLC. On the other hand, if you have significant equity in the property and it's titled in your name and you're sued, the property is a personal asset and could be subject to attachment by creditors.

I speak only generally because I'm an attorney in OH. You should consult your own OH attorney to discuss your specific situation. 

Don't accept cash.  It can be unsafe and it's undocumented.  They can buy money orders. Tell them you only accept Western Union or U.S. Post Office money orders.  I haven't done it but tenants can send money to you with GMail, PayPal, Square Cash, etc.  You can also likely set up something with your bank like ACH. Many tenants don't use banks or so they say. 

Always have rent due on the 1st of the month with no grace period. Late fee if paid on the 2nd or after. 

Sounds like a perfect situation for a LLC. Easier to set-up, pay yourself, etc. But check with an attorney and discuss your financial situation with a CPA.

Donald Velcio, CPA  

In order to shield your personal assets from liability, you should begin using the LLC now. Transfer title to the property to the LLC and then conduct all business in the name of the LLC - leases, insurance, have tenants pay the LLC, pay all bills from the LLC account, etc.

Deposits to the LLC are owner's equity (capital contributions). Your initial deposit to the LLC would be opening balance - equity and then future deposits are additional equity. If you take money out it's a member or owner's draw.

Talk to a CPA now before tax season begins on Jan. 1st.  CPAs will be very busy from Jan. 1st through the end of April. 

You need a properly drafted mortgage and a review of usury laws in that state.

In OH where I am, title/escrow companies cannot prepare legal documents such as mortgages, deeds, assignments. So you need to check the laws of that state.

Being two thousand miles away is even more reason to find a good attorney. I can't speak to rates for legal work other than it's probably cheaper than CA lawyers near you. 

Grace periods can interfere with your ability to begin evictions.

If you give him a 60-day notice now and he doesn't leave you'll still have to evict him. (I'm in OH so you need to check PA law.)

Yes, attorneys can be expensive but if you get ahead of a problem and call your attorney first it can actually save you a lot of money. (Same when you need a CPA).

I can tell you about the guy who could have paid me $1,000 at the beginning of his problems but chose not to and it cost $10,000 later on, but that's another story....

From what you said about this guy it's obvious you need to begin eviction right now.