Owner occupied 4 unit should I form an LLC

[David Harris]

Hi,

I own a 4-unit property in Washington, DC. I used FHA 203K to purchase it and I am an owner occupant. I've been doing a decent amount of renovations over the years out of pocket. Last year a tax professional suggested that I form an LLC, just for the management aspect of this, so that I can write more of my expenses off. Apparently my w2 income was too high to write off the entire amount of money I spent on repairs last year. The tax professional said I may have been able to get back about 3K more on my refund, if I had an LLC setup. Also, this will be the first year I will have made enough off rental income, such that the DC will charge me a non-franchise tax.

I'm wondering is it ok, if I set up an LLC for all management/maintenance related expenditures and to accept payments from tenants but still have the property in my name?

[Kurt K.]

@David Harris I would highly recommend forming an LLC for your company. I just inherited 14 units and after talking to a lawyer it was highly advised. Some advise to take out an LLC for each unit, but that can get complicated. After forming an LLC, can put your units in a living trust which you will have better asset protection. You can go to legalzoom.com to set it up or go to a lawyer you might already have a relationship with. I used a lawyer because I set mine up in a living trust.

Plus, you will want to talk to your insurance people to get that changed to your LLC once established.

Also start a checking account under your LLC and yes, tenants will be writing out checks for rent to your LLC. When I came up for my name for my LLC I avoided using my last name but came up with an acronym that worked. For example "No Pay, No Stay Properties, LLC" (not really mine)

Also you can start establishing credit with your new LLC formed company. Good luck.