As a property owner renting to others, you run a business. As such, you have the option to form various business entities. One of those is a limited liability company.
If you do nothing, the state and the law considers you a sole proprietorship, which means you and your business are one and the same when it comes to taxation and liability. Considering becoming an LLC could enable you to better protect yourself and your business venture because Apartments.com explains it removes the personal liability you have.
The importance of liability
If you hold all liability for your business dealings, it puts your personal assets at risk if someone were to take you to court. As an LLC, the business is separate from you, so if someone makes a legal claim against you and wins, that person cannot try to collect damages from you by seizing your personal assets. He or she would only be able to go after business assets.
Other benefits
Making your business an LLC also gives you tax benefits. Unlike some other business structures, you will still be able to report your business profits and losses on your personal taxes. This makes it easier to do taxes while still maintaining the protection of the LLC.
It also gives your business a more professional look because you can now operate under the name of the LLC instead of your name. All the property within the business will go into the name of the LLC, which can also help to protect your privacy.
Rental situations can easily become complex and result in lawsuits. To best protect yourself and your business, you should consider if making your business an LLC is a good option.
