Llc
 

I recently bought a house out of state that I want to do 1-6 months rentals. I hope to use a few times a year and spend winters there when I get older. Is an LLC really all that beneficial. It seems if something goes south, the renter would go after my insurance, then the LLC and then me. Considering my wife and I would be the partners of the LLC, what difference does it make? Does it just mean they would go after my vacation house before my actual house. I contacted a lawyer about setting up the LLC. Said it would provide protection but that’s her business so not sure how much weight I should put on that.
Seems I need an in state agent too, any idea what that cost?
Thanks.

An LLC gives you some personal protection. Personally I'd recommend you go with an LLC to protect your personal assets. As a side note, A judge found me personally responsible in a small claims case. I appealed and won because the judge ignored the fact that my business is an LLC which gives me some separation from the business. It doesn't mean you can screw people and say "hey take the company to court!" But it does give you some personal separation. It was explained to me as having some of the personal protection afforded to a S or C corporation but without the tax headaches. My brother in law is an attorney. He did all the work for me.

with rentals involved, yes an LLC is better--it offers a layer of protection against your personal assets if an incident occurred. If an LLC owns the property, then only the assets of the LLC are exposed. If you personally own the home--anything in your and your wile's name is vulnerable . Establishing an LLC is cheap insurance--but don't forget to file LLC taxes.

I have in the past had rentals under an LLC (and you don't need an atty. for this), but later decided adequate ins. coverage was better (for me). Having the house owned by an LLC would limit your exposure to that house, and not other assets outside of the LLC. At least that was my take on the only real benefit. Good luck.... and don't listen to me.... I might not know what I'm talking about :D.

Just make sure you have adequate ins. coverage...

So if I set up an LLC, I believe the LLC now owns the property. So even though the LLC has just my wife and I as partners, the renter can only go after the insurance and the rental house. My other property (main residence, cars, money) are protected? Thanks.

It doesn't really change how you file other than you now file a schedule C for business income. It's still done under your personal SSN if you want or you can file under the TIN you'll get when you file the LLC paperwork.

That depends. If you're thinking from a personal injury standpoint, yes. If you blatantly misrepresent something to a renter, you can be open to personal liability. The renter would file against you and the LLC if you knowingly misrepresent something.

Best thing you can do IMO is make sure you pay people to do work on the home. If you do work and something happens to a renter, you could be held personally liable. The plus side is, you can put new granite tops in your kitchen at home and... wait, I've said too much.

BTW, the information above is for information purposes only. It is not to be viewed as legal advice. And I am not an attorney but I did stay at a Holiday Inn Express once... so there's that.

Thanks for all the info guys. The place is pretty simple and solid. Hopefully, this is a non issue.
Curious, the lawyer wants like 1300 all in to do. When I was doing research, I saw a set up for a SC LLC for 150 plus 49 for the agent (out of state). Anyone use a LLC service (all they do I guess) instead of a lawyer? Quite a gap in price.

I’m not business smart by any means and I set up my LLC by myself and it wasn’t difficult at all. If memory serves, I just went online to the Secretary of States website to do it. I also needed an EIN number through the IRS.

Try a search for your state and see what it says, I am in MN.

Pretty sure you need a commercial insurance policy with an LLC as YOU are not the named insured. I don’t really work in personal lines so not 100% percent certain. Call your agent.

Set up the s corp. Tax headache isn't that bad and stil very doable yourself.....

Take off your losses your first few years to offset some gross.

Also set it up in a state that doesn't do corporation taxes....

No way I'd do a S corp. Closing one is a mess if the business has any assets. LLC gives you roughly the same liability benefits but without any more difficult tax prep. My .02

As a rental property, wouldn't that necessitate some sort of business liability coverage regardless of the personal/business structure? I don't know since I don't own rental properties.

Pretty sure it is common to have rentals allowed to some degree on personal lines.

They do ask about short term rentals for insurance - so some carriers have issues with this.

To the OP, you might want to ask Seahawk, Z or Eric at PP to change the thread title to something like LLC for rental/vacation properties. I know there are several people who own rentals that might be able to offer good advice.

One thing I'm not quite right about is tax implications. Since the property would be a source of revenue, and you get tax benefit for expenses, if you decided to sell it there would be tax implications. You might consider talking to an accountant to get the full picture.

I have had rentals in the past under my personal insurance with rental coverage and a healthy umbrella. My current property, a small 6 unit building, is in an LLC with a property manager. I wanted to get rid of the headaches of day to day tenant interactions and also minimize my exposure. Can be done either way. Setting up an LLC yourself is relatively easy. I use an agent service.

https://www.northwestregisteredagent.com/

The decision should be to set up a business entity. As to whether it's an S, C or LLC really depends on the amount of revenue you bring in. If you're north of $3M to $4M per month, then it starts to look like you really need to be a C corp because you get killed on the LLC fees charged by the state, at least in Commie minded California. Oh, and find a good small volume accountant, who can pay really close attention to your business and make sure the quarterly filings and applicable taxes are paid. Set up a separate bank account that you use to pay taxes and such online.

Form an LLC, and get the Federal ID from the feds. Open a BANK account, with only the assets of the LLC in that account. Keep track of any purchase for items needed by the house. Keep records of every single purchase and income. Have a CPA do the quarterly taxes. And get this, the 4 quarters are NOT even 3 months! Two quarters are 4 months long and 2 are just two months long. Only our crazy congress can decide 1/4 of 12 = 2 or 4.

I can handle the taxes. Don’t think I’ll be turning a profit this year.

Not after you do a complete remodel of your kitchen at home...err the rental property.. Wait! I've said too much again. :D