If you are considering starting your own business by purchasing properties to become rental properties, you may wonder whether or not you need an attorney to help you form a Limited Liability Company (LLC). Oftentimes, the first challenge is knowing what kind of business entity to establish. An attorney can help you understand how to protect both yourself personally, and your assets. While it can be challenging, making the decision to start a business with rental properties can involve many complicated legal questions. Always make sure to visit with an experienced small business attorney to help you decide whether to put rental property into an LLC. As you begin to weigh your options, consider the following advantages and disadvantages to creating a rental property small business as an LLC in SAn Francisco.

Advantages of an LLC

There are many advantages to creating an LLC when starting your own business if you are going to be purchasing properties for rental. Some of those advantages include the following:

• Asset Protection. In certain circumstances, an LLC will limit personal liability. Lawsuits are common in our society, especially against small business owners, and business owners need to mitigate and limit their personal risks.
• Tax Advantages. An LLC can be taxed as a “pass-through” entity. This means that any income and/or capital gains created by the business pass directly to you, the business owner. While the business taxes are paid as an individual taxpayer, you still are given legal protection through the LLC.
• Privacy. If you purchase your properties as an LLC, your personal name will not be public, and not associated with the property. If you desire anonymity, this would be an advantage for you to consider establishing your small business as an LLC.

Disadvantages of an LLC

If you decide to create an LLC with rental properties, some of the most common disadvantages include the following:

• Cost. Creating an LLC does cost money. These costs can vary depending on how much assistance you need creating the LLC and how much tax advice and assistance you will need.
• Lack of Asset Protection. Creating an LLC does not necessarily protect an owner from full liability. The operating agreement, as well as actual business practices and other legal documents, can potentially alter the level of asset protection provided by an LLC.
• Financing. Oftentimes, lenders will not lend money to purchase the property if it is under the name of an LLC. They often require it to be an actual person requesting the loan. Other options exist, such as paying in cash, or alternatively deeding the property to the LLC after you purchase it in your own personal name, but that can come with its own legal issues, as well.
• Due-on-Sale. If you attempt to deed the property to your LLC after you purchase it, as indicated above, then your lender may view this negatively. They may see this as a change of ownership status and therefore require full repayment of the loan.

Contact an Experienced Small Business Attorney

If you are starting your own business that will include rental properties, you should contact a small business attorney at Coepio Legal in San Francisco. We would welcome the opportunity to visit with you regarding your business. Call our office at 415-323-6212 for a free consultation today.