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Limitied Liability Company: How Landlords Can Benefit from this Organization Type

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By : Vicki Hat    99 or more times read
In renting out your homes, homeowners are at risk for liabilities. If your tenants become injured because of structural defects in your property, they can sue you and file for damages. This could happen unless if you have proven that you have performed your obligations with due diligence required on your part. Unless proven otherwise, you may end up incurring great financial losses.

To avoid instances like this, rental property owners have a way to limit their liability. One way to do this is to file for Limited Liability Company.

A limited liability company is an ownership type wherein some of the provisions for partnerships, sole proprietorship and corporation are blended together. Members of the group may be one or more.

In this article, you will find more about the reasons why landowners opt for this kind of organization and how this can protect them when it comes to liabilities.

Benefits of LLC

A limited liability company is not a separate entity like a corporation. However, LLC has the feature of corporation wherein owners are protected from incurring personal liabilities. In case the company can no longer pay for its debts, loans and other people, to whom the company owes money, the owners cannot be held liable for any deficit during pay offs. Therefore, personal assets can remain untouched and the liability will always be up to the extent of the assets invested in the company.

The manner of taxation can also be one of the best features of LLC. The more owners in the company, the better it is as tax application becomes more flexible. They can even elect a corporate taxation if they are qualified for this treatment. Aside from this, there will be no withholding taxes for the owners. They are responsible for paying self-employment taxes. However, if owners are considered inactive or passive, there is still a tendency of being exempted to pay the said tax. Owners should check on the IRS ruling with regards to this matter. Moreover, owners of the business can greatly reduce their personal income tax. Do you know why? Any expense incurred in for running the business becomes a deductible. So any of the operating expenses, acquisitions, salary for employees and many others can be used to lower the reportable income to the IRS; hence, lowering the taxable income tax of every owner.

There is also reduced formality in setting up and running the business. LLC have one or more features of corporation. However, the way business is commenced and managed is not as tedious as the former. There are no minutes needed. In fact, the decision-making can be divided equally among the members if they intended to arrange a member type of management. Every member has the right to take part in the decision-making unless owners elect a manager-managed LLC.

LLC Application

You can apply for LLC if you want to. You just have to follow state guidelines for application. Articles of Organization is required for filing and certain fees may be needed to be paid. The Operating Agreement is also needed but not required.
Find more real estate tips in Grand Prairie Homes for Sale and Lewisville Realty and North Richland Hills Homes for Sale.

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