practical for potential leasers.
CONSIDERING AN LLC
Many people who own rental properties opt to set up their business as an LLC. This means that all properties are owned, bought, and sold through a business rather than through a person. Also, the property itself is considered a business, so when you sell the property, you sell the business. The main reason that many people choose to set up an LLC is that it provides protection from being sued on a personal level. However, this doesn’t stop the company from being sued. This means that any money you have in your personal bank accounts and any other personal assets would be safe, but any business bank accounts wouldn’t be. Keep in mind that insurance can also protect you — to a point. Rental property owners should always have a dwelling policy (also known as landlord insurance ). The policies vary, but if something happens, you could get either replacement cost or cash value. Some also include loss of rental income. However, insurance might not cover all costs, and it doesn’t keep lawsuits away, so even with good coverage, your personal assets might be in danger. Setting up an LLC can cost anywhere from $50-$150 if you register through your state, up to several hundred dollars using a company like LegalZoom, or up to $2,000 if you use an attorney. There might also be annual fees and taxes, depending on your state. Also, keep in mind the LLC doesn’t pay taxes — the owner does. However, if there are multiple owners, the LLC has to file its own taxes, which might cost more money, depending on if you pay someone to do your taxes. 65
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