Let’s talk about protecting your rental properties! Today’s real estate market is sizzling hot, and many of us are finding opportunities to invest in real estate. For generations, turning houses into rentals and generating rental income has been a great way to build wealth.
So you’ve purchased a rental property – now what? If you own and operate the rental property in your own name, you could be held personally liable in the event a tenant or guest accidentally slipped and fell. The injured party would typically sue the owner of the property for damages. And theoretically, if they sued you personally, there’s no limit to what they could be awarded in damages – up to and including everything you own!
That’s why more and more rental property owners transfer their rental properties into an LLC or Limited Liability Company. If the LLC owns your rental property and the LLC is sued for damages, your personal liability is limited to the contents of the LLC, i.e. the rental property itself. The power of your LLC to limit your personal liability is based on how well it complies with the rules governing the proper administration of your LLC.
Unfortunately, the vast majority of LLCs fail to comply with these rules. For example, the Law says you MUST maintain proper Company Records, including Articles of Organization, Operating Agreements, Meeting Minutes and a long list of other legal documents. In the event of a lawsuit or an IRS audit, the FIRST thing they will ask for are your Company Record Books. And if you can’t present a pristine set of Company Records, the door is then open to ‘piercing the corporate veil’, jumping over the wall of protection a well-administered and documented LLC can provide, and make you personally liable.
So, if you’re a rental property owner, it’s time to get up to speed in protecting your assets from lawsuits and judgments. The Team at Life Planning Inc. can help you avoid these and other common legal pitfalls by setting up an LLC that is easy to administer in compliance with the law. Let’s explore your options together during your no-cost, no-obligation consultation. Give us a call at 877-438-7878 or click here Life Planning Inc. for more information on a wide range of Estate, Business, and Asset Protection Planning solutions tailored to meet your unique goals and circumstances.