LLC or Umbrella

[Chris Carrigan]

Having a hard time making the decision on putting a new STR into an LLC or just getting an Umbrella policy. In NC it costs about $450 a year in fees for the LLC (Annual Report and Franchise Fee). I currently pay a CPA $500 a year to file my business taxes on my Real Estate Firm, so I'm guessing about the same for the LLC which has to be a Multi-member because its my wife and I - so its a partnership tax return. I already paid $400 to set up the LLC, but haven't transferred the property yet. There is no loan (other than a HELOC from my personal property).

So I estimate the annual operating cost of the LLC to be around $1000. I will have a commercial policy from Proper on the property and could of course get additional umbrella protection for less than $1000 a year.

Thoughts?

[Colleen Goldstein]

I agonized over the decision when I was starting out trying to figure out the best way to protect myself. Through discussions with insurance companies and lawyers - I determined it is simply not worth the hassle of maintaining an LLC and to just carry a larger umbrella insurance policy. I rent 9 homes right now - 2 short term rentals - and do not have any in an LLC. Research "piercing the corporate veil" and requirements for an LLC to provide the same protection as a simple insurance policy.