July 05, 2021
Should we create an LCC for a Rental Property?
The answer is probably.
Any second piece of real estate, we call that a hot asset.
If you’re concern about slip and fall especially if you have renters in there you might want to explore LLC.
LLC or Limited Liability Company means that it limits the liability so if there is something to happen it is self-contained in that company. It can’t pour over to your personal investments. It is shielding the rest of your assets.
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Create an LLC
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The answer is probably because any second piece is a real estate we call that a hot asset so now if there’s a slip and fall especially if you have renters in there. You might have renters insurance that’s like a sandbag versus an LLC if we have this rental property and we’re concerned that there could be a slip and fall or something and now if we don’t put a box around this, which is what we call like an LLC that limited liability company limits the liability.
So, if there is something that happens, it’s just self-contained within that box. Meaning it can’t pour over into your personal investments it’s shielding the rest of your assets, so typically with second pieces of property, we’ll have that conversation with clients. And then especially if it’s a rental and you have other people setting foot on that property you might want to explore the idea of an LLC limited liability company also we set up asset protection trusts in certain scenarios as well but there should be a conversation with regards to limiting the liability on that hot asset just like a business. Okay, you want to limit the liability that’s what a business structure is it limits the liability to that either business purpose or that real estate now you wouldn’t put your primary residence into an LLC for tax reasons I would uncap it for property taxes that’s a whole nother conversation instead would probably look at an asset protection trust.