Property Management Company Startup Questions

[Luke Langhals]

We currently have an LLC that holds our residential rental properties. Tenants pay rent to that LLC, that LLC pays the property taxes, and that LLC hires contractors/handymen. We do pretty extensive renovations after purchasing a new home -- (single families and duplex) -- My insurance agent has suggested that I start a new LLC for property management. The property owning LLC will maintain basic home insurance on each individual property while the Property Management LLC will keep a larger umbrella policy with $1 million of liability. The new property management LLC will begin hiring/paying the contractors in order to protect our assets and put all the renovation work under the larger umbrella.

A couple of legal questions:

1. If my property ownership company is named (for example) Luke's Houses LLC....can my property management LLC be named Luke's Houses Property Management LLC. My worry is that the similar names will make the companies "linked" in the eyes of the court if we are ever sued? Does anyone see a problem with this similar company name scenario?

2. I often hire neighborhood handymen to perform small tasks for me. Sometimes I pay in cash or even hire a 16 year old to do some landscaping or simple paint jobs etc. If I have a liability policy under the management company, are these hires (and myself) protected under my new insurance umbrella? Anywhere from laying down some mulch, to repairing concrete steps, to patching some roof flashing. I try not to hire unlicensed/uninsured people to do jobs which might require a permit....but stuff happens and I've had some bigger jobs done by these guys. How can I protect for an accident?

3. Is there any benefit to having new lease agreements written using the Property Management's LLC. Having tenants now pay that company rather than the property "holding" company LLC that I currently use.

I appreciate any insight or personal experiences here. As we've grown over the last 2 years, I need to figure out how to keep growing while also protecting my assets. Does anyone else have two separate LLC's formed...one for holding properties and one for managing/renovating them?

Thank You

[James Wise]

Originally posted by @Luke Langhals:

We currently have an LLC that holds our residential rental properties. Tenants pay rent to that LLC, that LLC pays the property taxes, and that LLC hires contractors/handymen. We do pretty extensive renovations after purchasing a new home -- (single families and duplex) -- My insurance agent has suggested that I start a new LLC for property management. The property owning LLC will maintain basic home insurance on each individual property while the Property Management LLC will keep a larger umbrella policy with $1 million of liability. The new property management LLC will begin hiring/paying the contractors in order to protect our assets and put all the renovation work under the larger umbrella.

A couple of legal questions:

1. If my property ownership company is named (for example) Luke's Houses LLC....can my property management LLC be named Luke's Houses Property Management LLC. My worry is that the similar names will make the companies "linked" in the eyes of the court if we are ever sued? Does anyone see a problem with this similar company name scenario?

2. I often hire neighborhood handymen to perform small tasks for me. Sometimes I pay in cash or even hire a 16 year old to do some landscaping or simple paint jobs etc. If I have a liability policy under the management company, are these hires (and myself) protected under my new insurance umbrella? Anywhere from laying down some mulch, to repairing concrete steps, to patching some roof flashing. I try not to hire unlicensed/uninsured people to do jobs which might require a permit....but stuff happens and I've had some bigger jobs done by these guys. How can I protect for an accident?

3. Is there any benefit to having new lease agreements written using the Property Management's LLC. Having tenants now pay that company rather than the property "holding" company LLC that I currently use.

I appreciate any insight or personal experiences here. As we've grown over the last 2 years, I need to figure out how to keep growing while also protecting my assets. Does anyone else have two separate LLC's formed...one for holding properties and one for managing/renovating them?

Thank You

If you are running the company it doesn't matter if the names are or are not linked or similar. It's called piercing the corporate veil and it's not difficult in anyway. What you need to focus on is ensuring you are always in compliance with building codes and hiring licensed professionals to do things like electrical, plumbing and HVAC. On top of that I recommend a liability policy of at least $300,000 on everyone of your properties.