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Incorporating oneself LLC

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Bobby2016

Junior Member
State: FL
Good afternoon, I have been reading up on LLC's, just wanted to obtain some legal professional viewpoints as well.

Summary: I reside in FL. I own two rental properties (single family homes), one in Virginia, one in Washington state. Incomes/losses from these are reported through my personal tax returns. I have property managers but I am involved in the overall management, upkeep, & repair. One property is paid off, the other has a mortgage. I am retired military, 60% disabled, income roughly 65-70K/yr. My main goal is asset protection. Please let me know if any other pertinent details are needed. Thanks in advance for any advice.

Questions:
- If I form a LLC, does this help/hurt taxes in my situation?
- Does this protect my assets?
- Does it matter that properties are in other states or do I just file through Florida?
- What is the easiest/cheapest way to file for LLC?
 


adjusterjack

Senior Member
If I form a LLC, does this help/hurt taxes in my situation?
No. It's a disregarded entity for tax purposes. You would still use Schedule E.

Does this protect my assets?
Some, but not as much as you think. You are still liable for your own acts of negligence and any personal guarantees you make on contracts. It's also easier to "pierce the corporate veil" (google it) with a single person LLC.

Does it matter that properties are in other states
Shouldn't. But I would check the other state's requirements. That state's Scty of State website ought to have information.

What is the easiest/cheapest way to file for LLC?
Do it yourself.

But I think it's a waste of time and money. I had 3 rentals for 20 years. Never had an LLC. Never got sued. Always had appropriate liability insurance.
 

PayrollHRGuy

Senior Member
1. Probably not. A single-member LLC is a disregarded entity so your income taxes would likely remain unchanged.
2. That really depends on what you are trying to protect them from. An LLC is not going to protect them from negligence on your part. THe LLC will just be another asset.
3. Create the LLC in either state but it will have to be registered as a foreign entity in the other.
4. Since you were able to write this post you could likely do it before the afternoon is out from your computer. I'm not saying that is the best way to do it though.

It sounds like I'm anti LLC. I'm not. They have their place and can be very useful.
 

LdiJ

Senior Member
State: FL
Good afternoon, I have been reading up on LLC's, just wanted to obtain some legal professional viewpoints as well.

Summary: I reside in FL. I own two rental properties (single family homes), one in Virginia, one in Washington state. Incomes/losses from these are reported through my personal tax returns. I have property managers but I am involved in the overall management, upkeep, & repair. One property is paid off, the other has a mortgage. I am retired military, 60% disabled, income roughly 65-70K/yr. My main goal is asset protection. Please let me know if any other pertinent details are needed. Thanks in advance for any advice.

Questions:
- If I form a LLC, does this help/hurt taxes in my situation?
- Does this protect my assets?
- Does it matter that properties are in other states or do I just file through Florida?
- What is the easiest/cheapest way to file for LLC?
Realistically, if you want to protect your assets a good liability insurance policy will do more for you than an LLC in this scenario. An LLC won't make any difference for you taxes if its a single member LLC, as that is a disregarded entity for tax purposes.

When you get the liabilty policy you will need to make sure that your agent understands exactly where the properties are located.
 

Mass_Shyster

Senior Member
- Does this protect my assets?
If both properties are owned by the same LLC, then either is exposed for liabilities incurred by the other. For example, let's say there is a catastrophic event at one properties, and the LLC is sued and a judgment enters for $15 million. The LLC is liable, but you are not. If the other property is owned by the same LLC, then the other property will be end up being used to satisfy the judgment.

Insurance is the first option. If you need more protection, you may want two (or three) LLCs or Corporations.

I also don't think you want easiest/cheapest. You don't want to find out later that something was missed, and you've just lost ALL of your assets.
 

adjusterjack

Senior Member
let's say there is a catastrophic event at one properties, and the LLC is sued and a judgment enters for $15 million.
I can't think of anything other than the owner's negligence that would result an a $15 million lawsuit and he would be sued personally for that, along with his LLC.

So we are back to having liability insurance that would pay such a judgment or defend against it and make it go away if there was no negligence.
 

Taxing Matters

Overtaxed Member
I can't think of anything other than the owner's negligence that would result an a $15 million lawsuit and he would be sued personally for that, along with his LLC.
I can. The OP is not the only one involved in running the rental business. He or she also employs property managers, and maybe others, which is not surprising given that the OP is in Florida and the rentals are in Washington state and Virginia. If the OP ran it as a sole proprietorship he or she is liable for the acts of his agents with respect to the rentals. If done as a LLC, though, the LLC is one liable for the acts of the agents, not the OP personally. While you and I have slightly differing views on the value of a LLC when the business is truly a one person show (I think it can be useful even though, you evidently don't) there is absolutely no question that once others are involved – employees, agents, other owners — using a limited liability entity (LLP, LLP, corporation, etc) becomes important. When more then one person is going to be involved I always recommend to clients a limited liability entity, and every other lawyer I know does so too. It's practically malpractice NOT to recommend that.
 

adjusterjack

Senior Member
there is absolutely no question that once others are involved – employees, agents, other owners — using a limited liability entity (LLP, LLP, corporation, etc) becomes important.
I do agree with that. And I also agree that there are situations where even a one person operation could use one.
 

Taxing Matters

Overtaxed Member
Forget the LLC. Get insurance.

(I have experience with both.)
Insurance is of course a great idea. But the OP should also have a LLC (or other limited liability entity), too, given that he has others that are doing some of the work for him. That limited liability protection can mean the difference between walking away with all your personal assets and bankruptcy. LLCs are not difficult to set up nor difficult to maintain. So why wouldn't you use one if it can protect your assets if one of your employees or agents screws up?
 

Bobby2016

Junior Member
Thanks for all the replies, deeply appreciate it! I have insurance on the properties. Just thinking ahead about that rare chance of a multi-million lawsuit the insurance payout might not cover. The properties are well maintained, I just worry about the rare one in a million scenario. For instance, one property has a small lake in the backyard with natural hazards such as poison ivy/oak, drowning, sharp rocks/debris in the lake, etc. The back yard is fenced, but there is no locking fence across the actual waters' edge that would keep a small child, baby, or pet from accessing the waters' edge. The current tenants were briefed on the hazards verbally, but not in writing, there are no "swim at your own risk" signs posted. etc. The property line does actually go 30 feet or so into the lake.
 

LdiJ

Senior Member
Thanks for all the replies, deeply appreciate it! I have insurance on the properties. Just thinking ahead about that rare chance of a multi-million lawsuit the insurance payout might not cover. The properties are well maintained, I just worry about the rare one in a million scenario. For instance, one property has a small lake in the backyard with natural hazards such as poison ivy/oak, drowning, sharp rocks/debris in the lake, etc. The back yard is fenced, but there is no locking fence across the actual waters' edge that would keep a small child, baby, or pet from accessing the waters' edge. The current tenants were briefed on the hazards verbally, but not in writing, there are no "swim at your own risk" signs posted. etc. The property line does actually go 30 feet or so into the lake.
It costs very little to get a million dollar umbrella liability policy. However, I would tend to reconfigure the fence, with a locking gate so that small children cannot access the pond on their own.
 

FlyingRon

Senior Member
Understand the LLC will NOT prevent you from being sued over your own actions. As Taxing Matters points out, it provides insulation on your liability for others involved with the business. You leaving a known dangerous situation will not be absolved because you are hiding in an LLC. A sign will not disclaim the liability for your negligence in leaving a dangerous attractive nuisance on the property.
 

TigerD

Senior Member
I would also add that an LLC is not necessarily a disregarded entity for tax purposes. You can elect for corporate taxation.

OP: You live in Florida where some of the best asset protection attorneys in the country are located. You really should sit down with an attorney and discuss why you want to do what you want to do and if that is the best path. No one on this forum knows the details of your income, taxes, assets, and risks.

An umbrella plan is a good idea generally. As is much of hte other advice offered in the thread. But without an individual review by your attorney, no one can advice the correct path for you.

Good luck.
 

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