Hi everyone! Jason Marcordes here with Landmark Property Management and today we’re discussing why you should never hold your rental property in your own name. One quick note here, I want to point out the distinction between buying and holding. When I first got started, I was buying rental properties in my personal name which sometimes is a necessity for lending purposes. That’s ok if you need to do that to get started. However, when it comes to actually holding a property for the long term, you want to do that in a Limited Liability Company - otherwise known as an LLC.
The biggest reason for this is liability protection. Without getting super technical, an LLC has the benefit of what’s called the corporate veil. This means that if someone sues the property’s owner - which is now the LLC - it can only go after that particular LLC and its assets - not you personally. If the one property is all that’s owned by the LLC, that’s typically your maximum liability in most cases. If you have a personal residence, cars, or other investments, you can see why removing your personal liability is such an important reason for using an LLC.
If you own a rental property, you have tenants, tenants’ guests, vendors, neighbors and more that all represent potential liability if something were to happen. As you know - we live in an extremely litigious world and if one of these folks slipped and fell, you are at risk of getting sued. Putting your property in an LLC is one step to protect yourself. Now that is of course, assuming you already have the right insurance policy in place. If you don’t, stop this video and go check out our video on rental property insurance. I’ll link to that in the description below.
In IL, LLC’s are relatively simple to set up and they’re only $150 to file so there’s really no reason not to set one up. When you weigh the pros and cons, setting up an LLC to hold your rental property is a no-brainer. I’ve included a link below to the state’s website that has instructions on how to file and gives you the option to go ahead and get started. Again, it’s relatively simple but if you’re not comfortable with doing it yourself, you could always go with LegalZoom or one of the many other options out there. Even with a service like these, you should be all in for well under a thousand dollars. Which in my opinion, is a small price to pay for liability protection and ultimately peace of mind.
Alright, I hope this helped! If you have questions about any of this or if we can help in any way, consider us at Landmark Property Management a resource, we’re always happy to help. Feel free to check out our website at ChicagosPropertyManagement.com or give us a call.
What Type Of Insurance Do I Need For My Rental Property?
https://www.youtube.com/watch?v=18cuWRwUMws
IL SOS Instructions on How to File for a LLC
https://www.ilsos.gov/departments/business_services/incorporation/corp_instructions.html
IL SOS Guide to Organizing Domestic Limited Liability Companies in Illinois
https://www.ilsos.gov/publications/pdf_publications/c334.pdf
