Should I Put My Rental Property in an LLC?
Putting property you own in Texas into a Limited Liability Company (LLC) provides personal liability protection and other important benefits.
Being a rental property owner in Texas comes with major responsibilities and important legal obligations that must be met. The same as with any business, market fluctuations or other circumstances beyond your control can result in financial losses. You could also be held personally liable for injuries or property damages others suffer either on or due to the property. Putting rental properties into LLC can help to reduce your risks. As experienced Brazoria County business formation attorneys located in Lake Jackson and Pearland, we can guide you through the process. The following details some of the most common benefits.
As a Rental Property Owner, Protect Yourself from Liability With an LLC
A limited liability company (LLC) is one of the most common types of business structures. Under Chapter 101 of the Texas Business Organizations Code (BOC), it creates a distinct entity separate from the business owner or owners, who are then referred to as members. By forming an LLC, you can also specify ownership interests, the rights to profits, required investments, and individual management duties.
As the name implies, one of the biggest benefits of an LLC is that it can limit your liability against claims or lawsuits. As a rental property owner, you could face personal liability for a variety of reasons:
- Under certain circumstances, when tenants or visitors are hurt on your property;
- When they or nearby landowners suffer property damages due to maintenance issues, which may fall under the landlord’s control;
- Injuries to contractors working on the property;
- When the actions of a business partner or property co-owner violate state laws, building codes, or other regulations.
Putting your property in an LLC protects your real property, personal property and assets in the event of a lawsuit due to any of the above, shielding your other assets.
Additional Benefits of Putting Texas Rental Property in an LLC
In order to create an LLC for your rental property our firm begins by first filing the appropriate forms through the Texas Secretary of State. While it is often easier to do this when first purchasing the property, you can also transfer the title and update all other documents if you elect to do so after. In addition to protecting you from personal liability, other important benefits of putting a rental property into an LLC include:
- It allows you to create an operating agreement for the property, which is helpful with partners and investors;
- It allows you to easily separate personal and business expenses, making budgeting, managing expenses, and calculating profits or losses easier;
- It allows for pass-through taxation, in which you report profits or losses on your personal tax return.
Should I file my own LLC online or hire a business formation attorney?
This is one of the most common questions our business formation attorneys are asked. Or the even more common question, “Will it work if I just file it myself?” In this case, we tell clients the most honest answer we can give them, “It might work. It might not work.” Our business formation attorneys have seen clients file their own LLC through online services and there is no issue. In other cases, we have a seen defects that have required our firm to be hired to correct the mistakes (sometimes costing more than had the client just originally hired our firm) or we have seen a complete failure of the LLC (which can mean the client may be personally liable for debts and obligations). The most concerning thing for clients is they often do not know if the LLC was done correctly until they are sued or audited.
While our business formation attorneys take pride in ensuring LLC’s are properly formed, it is also very common in the LLC formation process for our business attorneys to provide general legal advice regarding the client’s proposed business and LLC formalities that are important after the formation. This service, generally, is not provided by online legal services. Call our office and find out why having a business attorney is better. If it was not better, our firm would sell our services online instead of meeting with clients and learning about their business, their concerns and their dreams.
Discuss Your Options with Our Brazoria County, Texas Business Formation Attorneys Located in Lake Jackson and Pearland
At Cordoba Law Firm, PLLC, we can guide you in options available for protecting yourself and rental properties, including putting the property into an LLC. Call or contact our Brazoria County business formation attorneys to request a consultation in our Lake Jackson office or Pearland office today.