How to protect yourself as a landlord

As a landlord, how to protect yourself in the event of mis-fortune or lawsuit arises. I am a newbie in the rental business and just would like to share what I have learned over the past months. More importantly, I would like to hear others’ opinions and practice.

Option 1: Form a limited liability company
1.a). LLC
•Pros:
o Protect your personal assets
o Flexible in forming and filling out tax
o Hide your identity on the rental property
•Cons:
o Higher annual fee (compared with S-corp, at least in my state), about $200-300.
o Need to pay state and local tax (if your net business income is positive) as well as asset-based tax
1.b). S-corp
•Pros:
o Protect your personal assets
o Lower annual fee (compared with LLC), about $20-50
o Hide your identity on the rental property
•Cons:
o More documentation required
o Need to pay state and local tax (if your net business income is positive) as well as asset-based tax


Option 2: Buy Umbrella Insurance
•Pros:
o Easy to do, just one phone call away.
o One million (or multiple million liability) can cover any suits from any issue
o No other tax to pay.
o
•Cons:
o Cannot hide your identity on the rental property
o Cannot separate your personal assets from your investment
o Relatively more expensive (tax issue is not considered). One has to bump up liability on primary house, cars, etc to meet the minimum requirement (For me the incremental costs are about $400-500 in total)

Hard to decide which one to choose. I am kind of leaning toward S-corp, but would like to hear from you guys. Also, I heard that Trust is another way to protect, but I know little about it and hope any experts can speak up here too.

所有跟帖： 

• Curious to ask: -山高月小- ♂ (186 bytes) () 03/12/2008 postreply 08:46:26

• quick claim deed to your trust or LLC. -jy101- ♂ (0 bytes) () 03/12/2008 postreply 09:02:43

• If mortgage co finds out, they have right to recall the loan. -山高月小- ♂ (209 bytes) () 03/12/2008 postreply 09:12:38

• I do it for tax and liability issues. -jy101- ♂ (339 bytes) () 03/12/2008 postreply 10:22:00

• Many thanks! -山高月小- ♂ (0 bytes) () 03/12/2008 postreply 11:04:57

• If I do not record it to county, others can still find out -挨踢- ♂ (29 bytes) () 03/18/2008 postreply 19:40:31

• just my 2 cents -jy101- ♂ (583 bytes) () 03/12/2008 postreply 10:11:17

• how to set up a trust and other follow up questions. -东南风起- ♂ (229 bytes) () 03/12/2008 postreply 11:26:55

• you can buy an online kit for $100 or pay a attorney -jy101- ♂ (437 bytes) () 03/12/2008 postreply 16:56:30

• Quit Deed -luck1- ♂ (164 bytes) () 03/12/2008 postreply 12:24:13

• No, at least not the state I am at. -jy101- ♂ (0 bytes) () 03/12/2008 postreply 16:57:59

• Would quit claim cause u unalbe to claim depreciation on persona -TraderZhou- ♂ (95 bytes) () 03/12/2008 postreply 13:55:53

• you file your 1040 as normal, trust do not need -jy101- ♂ (75 bytes) () 03/12/2008 postreply 16:59:33

• 回复：thanks -TraderZhou- ♂ (0 bytes) () 03/13/2008 postreply 13:06:38

• Pick the right tenants -RiverSouth- ♀ (2243 bytes) () 03/15/2008 postreply 15:31:09