Eleven years ago, I became an Accidental Landlady. My husband and I (Landlords & Landladies) bought some properties in a short sale because it was next to his professional office, and we thought he might someday need more parking. The hitch: it came with five tenants who were happily ensconce in the properties. I was teaching classes and raising a family, but I thought, why not add one more thing to the mix? Thus, the path to being a landlady was establish.
The first thing I did was read up on what I was getting into. Since my husband was a potentially liable professional, I wanted to keep my endeavor as separate as possible from his. The universal recommendation seemed to be to form an LLC. I had a local attorney do this for me for about $600. Since that date, I have formed several other LLCs, utilizing LegalZoom or other online places, for under $300.
The main purpose of an LLC is legal protection
Your personal assets are separate from the business holdings. One recommendation I hear from other landlords was to create a new LLC for every property, Thereby further protecting assets if you are sued. For example, if you have ten properties under one LLC, and if you are sued, the pot of money includes ten properties. If you just have one property, there is only one property that can be legally attack.
Legal protection is the biggest reason for an LLC.
I have discovered other good reasons for formulating one:
- Protecting debts. With an LLC, you can put utilities and other services in your LLC name, thereby protecting your own name and assets from that debt. I often put utility bills in my LLC name and constantly check to make sure that tenants don’t turn off utilities that get put into my name. If I incur a large debt for some reason, the utility cannot come after me personally, only my LLC. This has not happened, but I like the idea of further protection!
- Making you appear to be more important. Even though it costs under $300 to form, an LLC, for some reason, inspires awe. It just sounds better! When I started my business, I called it “Mitcham Group LLC”– it sounded better than Wendy Myers’ Rentals. For one thing, I was a “group”– no one had to know that it was just me cleaning, painting, and renting the apartments at that time!! Now, I have several employees and ancillary services, so I have grown into a group. At the time, it was just being hopeful for the future! And LLC just added that professional touch that made people feel like I knew what I was doing.
- LLCs are more laid back. Since I have get bigger, I’ve look at S and C corporations. Of course, your accountant is the best one to advise you in this area, but for me, the LLC works and is easier to manage. I am free to set up the company structure and bylaws however I want. I don’t have to answer to a board of directors or jump through any other organizational hoops.
If you decide to create an LLC
My recommendation is to hire an attorney to help out the first time. It is worth it to have things done right. But if you have some know-how and want a cheaper option, the online services are great; just be careful of the upgrades they want to sell you. For example, LegalZoom wants to charge you $49 to create a federal EIN number for tax purposes. You can do this yourself in exactly 30 seconds by going to the IRS.gov site for FREE. You will need this FEIN to put bills in your name, establish credit, hire employees, etc.
One last tidbit
When choosing your LLC name, do some research. Firstly, Make sure there are no competitors with the same name. Make sure the name is available from the Secretary of State; in Ohio, you can do a simple online search to check. Make sure you can get a website domain with the same name. I heard of one smart individual who wanted to capitalize on a local car dealership name, and he picked a keyword from their name. When he did advertising, he piggybacked on their good, established name to promote his own business. For example, his commercials came on after theirs, and his name was next in the phone book. Of course, even with an LLC, you can choose a “doing business as” dba name. I have done this by choosing LLCs that have private meanings and then running them all as dba “Mitcham Group Apartments.” This way, I gain some anonymity with my LLCs but have them all run as one entity for promotional purposes.
Lawyers that deal with landlords and landlady
Lawyers who specialize in Landlords & Landladies cases and law summarize a set of laws that help property owners in their rental affairs, whether with their rental agreements, their tenant disputes or with property law. They assist with lease drafting, compliance with local rental laws, eviction processes, and they also help resolve issues if they come up with tenants. These lawyers offer expert guidance to Landlords & Landladies to ensure that assets are safeguard, gaps are minimize, and the Landlords & Landladies -tenant relationship can run as smoothly as possible. Be it in matters of tenant screening or security deposits, hiring a lawyer for landlord-tenant laws can help property owners with legal issues and save their time, effort, and money, ensuring a stable and law-abiding rental business relationship.
Reference :
Wendy Myers, AsktheLandlady (2014, August 16). Should Landlords & Landladies be LLCs?.