Change from Sole Prop to LLC?

[Eric Robbins]

My dad passed away and my mom doesn't want to deal with the 2 multi-family buildings (7 total doors, approx $9000/mo gross rents). I am planning to take over the management of the properties. Currently there is no LLC created, all the personal and business finances and expenses are mixed together. One building is paid off. Initially I'm planning to take a property management fee of some kind while providing my mom with income to live on. I'm trying to figure out the most important things to do right off the bat, how to organize accounts and business entities, etc. Thanks for any thoughts you might have.

[Todd Willhoite]

I don't know what state the properties are located, so can't give specific legal advice. In general placing both buildings in an LLC or one LLC for each property will provide a layer of protection if there is a lawsuit. LLC is not a substitute for adequate liability insurance as you are still at risk of loosing the assets in an LLC if the tenant has a significant valid claim. Placing property in LLC most likely will effect the mortgage and give the lender the right to exercise the due on sale clause. Keeping the properties outside a LLC you lose the asset protection. As long as each building is 4 units or less, then the building may qualify for 30 year mortgage with fixed interest rate.