For those that are fortunate enough to own investment or rental properties it is important to make sure that you are protected from any liability related to your property.
For example, if you are listed individually on the title to the property, and someone gets hurt on your property, then you may be personally liable for any damage that results. This means that your home, cars, bank account, etc. are on the line if someone sues you because of an issue related to your rental property.
Having an LLC listed as the owner of the property is a way to avoid this personal liability.
In other words, when property is owned by an LLC, it is only the LLC that can be successfully sued. For instance, if your tenant is upset because he or she feels repairs to the property haven't been made in a timely manner, your tenant can only successfully sue the LLC and not you personally (assuming you are properly separating yourself from the LLC).
In Utah, forming an LLC for the purpose of owning your investment or rental property is a common and fairly straightforward process.
- To begin, if you have a mortgage on your property it is important to contact your lender to make sure it is okay to transfer title to an LLC.
- Once you have the okay from your lender, you can form your LLC.
- Your next step is to transfer title to the property to your LLC. This is usually done with a warranty deed or a quitclaim deed.
- Once you've signed the deed, don't forget to record the deed in the county where your property is located.
- It is also critical that you set up a bank account for your LLC. This is used to receive rental income and pay expenses such as property taxes and repairs.
- Lastly, you should amend your lease agreement so that the LLC is listed as the landlord. This will shield you from any lawsuit brought by your tenants for breach of the lease agreement.
As soon as you have followed all of these steps you will be essentially shielded from any liability that may arise from your ownership of the property. In addition, you can enjoy the tax benefits of writing off expenses related to your property.
For those that have multiple investment or rental properties, it is recommended that you set up an LLC for each property that you own. That way each property is shielded from liability arising from other properties.