My husband and I own one rental property. Should we have an LLC?

My husband and I own one rental property. Should we have an LLC?
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#1

My husband and I own one rental property. Should we have an LLC?


#2

Creating an LLC and putting the rental property in it would be an asset protection move.  There would not be any tax advantages.  Many people hold rental properties in their personal name without negative liability consequences, but you will need to decided based on your circumstances.  What is your risk tolerance?  I would start you off by creating a personal financial statement.  What is your family net-worth (assets - liabilities)?  Look at your assets and how are they titled.  An LLC would help shield the rest of your assets should anything go wrong with the rental.  Do you have adequate insurance coverage?  An umbrella policy is fairly cheap and highly recommended.  Do you have a formal rental contract that is signed by the tenant?

If you choose to create an LLC, you will need to actually fund the LLC by having the property retitled into the LLC name.  If the property has a mortgage talk to the lender about the process to see if you can do a loan modification versus paying all the refinancing fees.  Also an LLC with 2 members will cause you to have to file a 1065 Partnership tax return.  If the LLC is setup with only one of you as the owner, then you report the rental on your 1040 as you have been doing. 

Contact me or a professional you trust to talk about the specific details.  A CPA, a CFP, or an Attorney should be able to help you unpack the specifics.  As your net-worth grows the more coordinated teamwork you should have between a CPA, a CFP, and an Attorney.


#3

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