Should I create an LLC for a Property Management Company?

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I'd set up an LLC and in fact, a different LLC for each property. That way each property is protected from potential issues (lawsuits or whatever) that might arise at the other property. Also, by holding the assets in an LLC, you are personally protected as well so its a good idea to keep rental income separate from your 9-5. Just keep records, accounts and activities separate from each other as well as from your personal stuff. LLC's are easy to set up and easy to maintain, they are very flexible and affordable. For the first time you may consult a lawyer or accountant to help. I've used a paid service the first time to see how it works and since have created several on my own in just a few minutes online. Although different states have different rules.

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@Jo Ballagh I have LLCs for each of my 2 properties to collect rent and pay operating expenses. And then a 3rd umbrella LLC which owns the 2 other LLCs. I recommend it as Kevin suggested for protection of your personal assets. Account Closed Do you also have separate accounts in each LLC for security deposits? Or just one central account that holds only security deposits but for multiple properties?

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@Jo Ballagh I started a property management company and formed an S-Corp for the company. I sat down with a lawyer, and also did quite a bit of research on the topic of forming an LLC verses an S-Corp. If I were you I would research and ask the help of a lawyer that is willing to answer some questions on this topic for free. The lawyer that I have met with has answered many questions as we went out to lunch. Also, check in with a CPA about the tax implications of both. An LLC can have a lot of protection, but has some different tax implications from what an S-Corp has. They carry the same protect, but are just looked at a little different from the IRS standpoint. Good luck and I give this information to you just as advise I have gotten from other professionals and research I have done. (I am not a lawyer or CPA.)

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Set it up as an LLC if you can. Using FHA to get into a fourplex can make that tricky however, as the FHA doesn't want you to purchase properties to crate a real estate "portfolio." I know this has not stopped other people though.Setting up an LLC is beneficial for various reasons. It protects others from coming after your personal assets if something happens to your property and vice versa. Also, tax benefits that a corporation gets are amazing. A big reason to set it up as an LLC is if you ever get into commercial properties, you have some sort of track record to help you get traditional bank lending (portfolio or profile loans).It is easy to set up yourself, however I always recommend using a CPA for their expertise.

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@Ray Shum I haven't jumped into rental as a personal investment yet but I see it on another scale at work so I might not have the best answer for your situation. But my quick response is if you think its important enough to have 2 LLC's to protect your assets, then why commingle anything between the two. I might be a little more conservative than others where I too would have 2 LLC's for 2 properties while someone else might have 5 single family homes in 1 LLC. But atleast consider each LLC separate from the others (and yourself) in every way possible.

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I highly recommend operating under an LLC. However, unless you get the answer from an attorney, I would make sure you know exactly where your liability lies!

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Is there a reason that you would want to throw your asset (the home) into the LLC verses holding on to it on your personal books? My thought process is have the LLC be the property management company where expenses and rental income is booked and hold my buildings in my personal name so if there was a lawsuit against the LLC - I would still own the property? Thoughts I am no lawyer but thinking out loud here.

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I would always recommend an LLC. The worst thing that can happen is a big lawsuit and you lose all of your personal belongings because you do not have a Limited Liability Company to protect your best interests. There are really no negatives to having an LLC own your properties honestly.

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In Texas, you can set up a series LLC. Each property can be set up as a separate LLC in the series. However, you can have one bank account for the entire series. This adds another layer of protection for your properties, without the hassle of separate LLCs.

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Great information, guys! I like the idea of an umbrella LLC and a separate for each property for liability protection. This was sort of what I was thinking so it's good to hear that for some, this isn't a waste. I've had people tell me it's too much to manage but this sue happy society we are in makes me want to set up all the barriers I can!Jo