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Is an LLC the way to go for new property management business?
Hello everyone! I have recently purchased a couple of properties, including a duplex and a triplex with a goal of having 40+ apartments at running capacity. My question is should I start an LLC for a new business and what type of attorny should I seek out? Thank you for any and all help!
I would approach it from a different perspective. Before deciding how to hold the properties, you need to be clear about what you’re trying to accomplish.
I’m not clear, so I can’t make a recommendation. Is your concern management? Taxes? Liability? Estate planning? Hiding from your tenants? One size does not fit all.
I am clear about one thing. There is no entity that you can create (in this country, anyway), that will shield your identity as the property owner. You can hide, avoid and obfuscate, but not shield.
I will agree with excon, as to what you are trying to do, there are problems with any type of corproation you form, from the issues of paying tax twice on money you take for personal use but protections from many law suites.
But then if you form a corporation they have to own the house for it to work for protection of your money.
It can get very compliacated and really sitting down with an attorney will be a couple hundred dollars well spent just for the advice if they don't even do any of the incorporation papers for you, just to help you understand the value and the problems of all the various types of incorporations.
And after you decide which type you have to decide what state you want to incorpoate in, there are various good and bad reasons for that also.
Persoanlly I own many rentals and manage some office properties, but I do it merely as a sole owner and have no problems.
So often there is no reason to jump into alot of paper work and alot of tax filing additions you don't need unless you have reasons to do so.
Thank you All for your comments and to be more precise, I am a novice property owner who plans on having mainly residential, (2-4) unit apartments, and I am afraid of being sued over something trivial by one of my tenants years down the road and I want my personal assets protected. I have read several times that in many cases its advantageous to form an LLC to protect not only myself, but also for tax benefits. I do plan on working with an attorney, I just wanted to get some personal opinions first. Please Reply Again! Thank You!
Richard - LLC is the ONLY way to go. Ask this same question on the MrLandlord website and you will get answers specific to your state from landlords in your state.
As a professional property manager for 40 years, my successful clients hold in LLCs and get their mail at a po box. Education, good systems and documentation will go a long way to lessen your exposure for liability....getting sued goes with the kit of being a landlord.
The landlord business is a GREAT business. You can make a jillion. It sounds as though you’ve made a good start. You’re asking the right questions, and you’re asking them BEFORE you get into trouble. Given that kind of insight, I’m sure that you’ve already considered what I’m about to say.
But, I love to hear myself talk, and I’m up early….
I refer you to my phrasing that what you’re about to do is the landlord BUSINESS. It needs to be managed like a business. I’ve been a landlord. And, I’ve been a tenant. There are landlords who think all they have to do, is collect the rent. Then there are landlords who understand that they’re in BUSINESS, with ALL the downsides of any business.
But, as in any business, good management trumps downsides. A good manager makes sure that his customers (tenants) are happy (especially since he’s used his management skills to pick THEM, rather than getting picked), and wants to please them. A landlord like that is hands on. He’s available. He gives his tenants his cell phone, and asks them to call.
The above has NOTHING to do with not getting sued – or it has EVERYTHING to do with not getting sued. You choose.
"A good manager makes sure that his customers (tenants) are happy "
I disagree - I can't make my tenants "happy"....I can manage the property effectively for my client property owners and that may mean that the tenants can't be made happy at all - ever.
Making tenants "happy" is not a part of my management program.
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