Discover the advantages of establishing a Rental Property LLC in Florida and how it can offer legal protection and tax benefits for property owners and real estate investors. Explore the key reasons why setting up an LLC for your rental properties in the Sunshine State is a smart move.
Whether you have a vacation rental, residential home, or apartment building, you might not think of yourself as a business when you’re considering renting a property out to someone else. But the truth is you’ll be entering into contracts, collecting revenue, and managing expenses. Your tenants can sue you if things go wrong, just like any business. It’s a good idea to take advantage of legal protections for yourself, like forming a limited liability company (LLC).
The benefits of forming an LLC are immense for real estate investors for a fairly low cost. When you use our services to form your Florida LLC, we can make the process quick and easy. And after formation, our other products and services can help make running your rental property business as smooth as possible.
If you’re ready to form your LLC, we know how to set up one in Florida. Contact us, and we’ll be by your side to complete these five easy steps:
Once your LLC is up and running, you can transfer your property to the LLC’s ownership. You’ll want to register the deed with the county comptroller where the property is located. You also need to pay a documentary stamp tax to the Florida Department of Revenue. The tax is based on the property’s fair market value if you transfer it to your LLC.
If you have an active mortgage on the property, you’ll need to inform your lender of the transfer. Because the business now owns the property, you should be prepared for the lender to rework the terms of the loan. This might include a new, higher rate.
If you haven’t yet rented out the property, remember to update your lease or rental agreement to show the ownership change. If you already have an active rental agreement, you’ll want to inform your tenants that the LLC will now be the property owner. Don’t forget to edit the current rental paperwork to make sure the LLC is a party to the agreement.
An LLC is an entity separate from its owners. It offers many benefits over sole proprietorships or partnerships. For example, you may be able to deduct business expenses from your personal tax return. You also benefit from the protection offered by limited liability companies when they are sued for damages arising out of their operations.
If you’re starting a real estate business, then you’ll want to protect yourself from any legal claims that might be brought against you if anything goes wrong with the property. Even though you should carry liability insurance, having an LLC offers yet another level of protection for real estate investors. If an individual wants to bring a lawsuit against you, they must first sue the LLC. Therefore, an LLC protects your other assets from the consequences of a lawsuit.
To maintain this protection, you must keep your personal and business finances separate. This means separate bank accounts and records, and you cannot co-mingle rental income with your personal finances. Keeping separate records will also help you at tax time because LLCs use “pass-through” taxation. You’ll report any business profit or loss on your personal tax return and pay at the individual rather than the corporate tax rate. At that time, you can deduct business expenses from your tax liability. But you can do this only if you’ve kept your business and personal expenses separate.
Another benefit of the LLC is the series LLC. Although Florida does not register series LLCs, you can create one in another state and apply in Florida as a foreign LLC. The series LLC offers additional protection for your investment property. You can create a separate “series” for each property under the umbrella of the primary LLC. Each series operates as a separate business without maintaining different business registrations. Under a series LLC, each property can be protected from the liabilities of your other properties.
Whether you consider yourself a real estate investor or plan to rent out your vacation home during the off-season, you may want to form an LLC. If you start with an LLC, you can buy property in the LLC’s name. When you buy real estate as business property, the deed will be in the LLC’s name from the start. While it’s easier to create an LLC before buying, you can transfer a property you already own to a newly formed LLC with a little work. We’ll cover the extra steps you’ll need to take below.
If you’re starting to think that managing real estate might not be as easy as you initially thought, you’re not alone. Form your LLC with us for your rental property in Florida, and we’ll keep you up to date with everything you need to do to comply with government regulations. When you use our Worry-Free Compliance Service, all your financial documents will be on your dashboard for you to access.
We’ll send you reminders when it’s time to update something. Use our guide to writing a business plan, and we’ll help you identify and meet your goals faster. Let us help you form your rental property LLC in Florida, and our team of business experts will be there to help you through every step.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Having an LLC to hold your rental property will protect your personal assets from a lawsuit and help you keep your business and personal finances separate. You’ll also be able to deduct business expenses from your tax return.
Under Florida law, your company name must contain the words “limited liability company” or the abbreviation “L.L.C.” or “LLC.” The name must also be distinguishable from all other registered entities and comply with other statutory rules.
You should register your LLC in the state where you plan to “do business.” If you receive rental income from a property located in Florida, your LLC is considered as doing business in Florida, not your home state. Therefore, you probably don’t need to register in your home state once you’ve created your Florida LLC to manage your rental property. But it’s still important to check with your state’s authorities about specific rules.
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