Written by: Nataline Garcia, Esq.
A Florida LLC can combine the efficiency and simplicity of sole proprietorships and partnerships with the numerous legal protections afforded by a corporation. To keep the explanation of an LLC simple, “limited liability” means that its owners, also known as members, will generally not be personally responsible for an LLC’s debts nor lawsuits. For example, if an LLC were to file for bankruptcy, the member(s) would not have personal responsibility for the outstanding debts. In the event the LLC were to face a lawsuit, the member(s) would not risk losing any personal assets to cover a potential settlement. Also, just as important, the IRS lets an LLC choose whether to be taxed like a Florida corporation, or like a partnership. Depending on your personal preference, each has its benefits.
What are the Benefits of Creating an LLC for your Rental Property?
In this blog we will view three of the main benefits from creating an LLC for your rental property:
1. Limiting your personal liability.
If you own your rental property as an individual and someone files a lawsuit against you, your personal assets can be at risk. However, with an LLC, the only assets that could potentially be at risk are the assets owned by the LLC. For example, the property itself, not other properties you may own or personal assets, such as money held in bank accounts.
2. Keeping your rental properties separate from one another
If you own multiple properties, you can “insulate” each property from liability claims by setting up separate LLCs for each property. If you have all of your properties under separate LLCs, you properties are more protected; if someone files a lawsuit pertaining to one of your properties, the rest of your properties will not be affected by the lawsuit. This effectively separates and protects each of your properties.
3. Separating business and personal expenses
When you create an LLC you should also create a bank account for the LLC whereby you can pay all your business expenses and distribute generated income. Keeping your business expenses separate for personal expenses makes it much easier to claim these business expenses when it is time to file your taxes. With this in mind, it is important to never comingle these expenses or income with your personal accounts once an LLC is created. In the event you comingle monies generated from your LLC with personal money you may risk losing the protection offered by an LLC.
If you are interested in learning more or believe that creating an LLC is right for you, please contact our office at 305-227-4030 or via email at legal@raygarcialaw.com to speak with an experienced attorney.
Law Office of Ray Garcia, P.A.
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