All Forum Posts by: Rodrigo Hernandez

@Rodrigo Hernandez Yes, there are a few important considerations. Since the property is titled in your personal name but you're planning to collect rent through an LLC bank account, the IRS still treats the rental income and expenses as yours personally—because ownership, not bank account activity, determines tax liability.

So, even if the LLC collects the rent and pays the mortgage, the income and deductions still flow to your personal return (Schedule E), not the LLC's, unless you formally transfer ownership to the LLC—which has legal and tax implications (like potential transfer taxes, mortgage due-on-sale clauses, etc.).
To avoid confusion or misreporting:

• Keep clear documentation showing the LLC is acting as a property manager or agent on your behalf.
• Ensure the LLC doesn't claim the income on its own tax return if it doesn't legally own the property.
• Alternatively, consider forming a single-member LLC for liability and banking separation, which is disregarded for tax purposes, keeping reporting simple.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

 Hi Rodrigo,

I actually do this with my rentals. Per my CPA, we set our LLC up as jointly owned disregarded entity through the IRS and received an EIN number. This allows everything to run through your personal return.

We collect rents and pay mortgages directly from our business checking account. Pay all utilities, contractors, and other bills through this account. Income and expense are tracked through an online accounting platform and we submit the tax forms from the platform. 

When I created the LLC, we set it up as a real estate rental business. You do not need any professional licensing to manage your own properties. If your looking to manage other landlords properties through this LLC, you will need to get licensed as a real estate sales professional and follow your state/municipality laws and regulations. (however, I would never manage others through my own property management company... just my opinion)

If you've set up your LLC as a partnership, you will not be designated as a disregarded entity and a seperate business tax return will need to be completed.

Noah

Hi Rodrigo, 

If the property is still in your name, collecting rent directly through the LLC without a formal agreement could create complications. It's crucial to establish a clear separation between your personal finances and the LLC's operations.

Ideally, transferring ownership of the property to the LLC offers the most robust asset protection. This strategy shields your personal assets from potential lawsuits or claims arising from the property.

If you decide to keep the property in your name, utilizing the LLC as a management company provides a layer of separation and professionalism. This approach involves creating a management agreement between you and the LLC, with the tenants paying rent directly to the LLC. From there, the LLC can handle property-related expenses and can retain a management fee for its services.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.