Owning rental property can be a good way to boost income, but it also comes with a lot of responsibility. One of the smartest things you can do is to utilize an LLC when you own rental property, especially in Florida. This relatively easy process is an important step in protecting you and your family, as well as your finances, when you own rental property.
What is an LLC?
An LLC is a limited liability company. It is somewhat of a hybrid between a corporation and a sole proprietorship, offering many benefits that you can take advantage of. In the case of rental property, the LLC would be the owner of the rental property in question while you would still derive profitable income from it.
Possibly the most important advantage of an LLC is that it limits your personal liability in case of debt or lawsuits arising out of the business itself. In terms of rental property, this means that if a tenant were to sue the LLC that owned the property where a dispute or injury has arisen, only the assets that the LLC has would be at risk. Generally, tenants or creditors cannot come after your personal property or finances when you have shielded yourself from such personal liability by forming an LLC. However, if you own rental property solely in your name or with someone else without forming an LLC, debts that must be settled from such ownership can involve your personal property and/or finances.
Another important benefit of an LLC is that they offer “pass-through taxes” for their owners. This means that the profits made by the LLC will not be subject to taxation like those of a corporation would be. Instead, the profits that pass through to the owners would be taxable on the owners’ personal income taxes. In Florida, there is no personal income tax. While owning an LLC in Florida will still require you to pay federal income tax on any profits gained through the LLC, the business itself would not be liable to tax from the state. This can save you a great deal of money each year.
How do I form an LLC?
There are many online resources that can be used to form an LLC. However, these are generally generic forms that do not always meet the qualifications required for forming business entities. Further, these forms cannot answer questions you may have about proper filing, taxes, and other important aspects of forming a business entity like an LLC. If you own rental property, the first step to take in protecting yourself and your personal assets is to contact an experienced attorney that can help guide you through the process and ensure that all of your entity’s information is created and submitted accurately. Even the slightest mistake in creating such an entity could leave you open to liability, taxes, penalties, and other fines. It is important to discuss your options with an experienced business attorney to make sure that you are making informed choices to protect your assets and your future.
Summerfield Law Office is ready to help you through the process of creating the business entity that is right for you. If you own rental property and you’re ready to think about forming an LLC to protect your assets, contact Summerfield Law Office today to see how we can help you make the most out of your rental property.