Accountant + Lawyer fees

[amarowsky]

I wanted to know if anyone could provide ball park estimates based off of their experiences as rental owners who use professional council and accountants.

I am planning on setting up and LLC and trying to use every tax tool that supports real estate purchases. Does anyone have a ball park figure for this charge annually?
-Accountant fees?

-Lawyer fees? (for setting up LLC, and any ongoing needs for a lawyer and approximate costs).

-Please include your state too, so I can compare filing fees.

-Any general advice will finding one in a local area.

I would appreciate it!

[james.hendrickson]

You may also need to pay for an annual business license. For example, when I set up my LLC in the District of Colombia they charged a couple of hundred for an annual business license.

[amarowsky]

Does an LLC provide any personal asset protection if you are the sole proprietor? Or only if there are more than 1 owner (partners)?

[kork13]

Does an LLC provide any personal asset protection if you are the sole proprietor? Or only if there are more than 1 owner (partners)?

Yes, that is the primary function of an LLC (limited liability company) -- it limits any liability to the company, in exclusion of the LLC owners' personal assets (however many partner-owners there may be, whether 1 or 10).

There are restrictions to this, most notably that you have to keep the LLC totally separate from your personal finances (except a defined dispersal of profits to the owners as income, or "investment" of additional money from the owners into the LLC). But those amounts should be defined by the LLC's incorporation documents, for example by stating that the owners are to receive 75% of net annual profits, and that owners may invest additional funds in the LLC for capital improvements (which funds are then documented as having been, in fact, used for that purpose). You can define it however you like, but you should absolutely define it, and follow those provisions to the letter.

You just need to keep it very explicitly separated, because if the LLC is sued by a tenant, customer, or contractor for whatever reason, if you've used the LLC as your own personal piggy bank and haven't kept it separate from your personal assets/finances, the court can find that the LLC is void (in that you have "pierced the veil"), which would open up even your personal assets to the law suit. Biggest thing to remember is that as the owner of the LLC, the LLC is a 100% separate entity from your personal assets, and you need to treat it as such. In short: you work for the LLC, and all business conducted on behalf of the LLC needs to be done in the name of the LLC (not in your personal name). For example, you hire a contractor to do some maintenance work. The named customer on the invoice should be the LLC, not you. Or if the LLC needs a loan to purchase a new property, the LLC needs to apply for the loan, and the LLC's existing assets need to serve as the loan's collateral -- not you or any of your personal assets.

Also note that the LLC will need to get separate corporate liability insurance coverage separate from your personal liability coverage. This will, again, help protect your personal assets from law suits against the LLC.

What all of this does for you is that if somebody sues the LLC, the most that they can get out of the suit is the money from the LLC's insurance, and if that's not enough, the assets owned by the LLC. As long as you respect the boundaries of the LLC, you cannot personally be touched by a lawsuit against the LLC.

[amarowsky]

I spoke with my accountant for some information.

He said his opinion was, that I don't NEED an LLC with my (1) rental.

His reasoning was, that as long as it is insured properly, and my tenants have proper rental insurance (that I would require to rent), that I should be sufficiently covered.

He did note, that an LLC does provide extra liability coverage. Just for the smaller amount of risk (just 1 rental), he doesn't think it would be worth the extra costs that I would incur to set up the LLC, and have to pay extra to have LLC partnership taxes prepared and filed (own the rental 50/50 w/ my brother).

I'm looking into the cost for ann additional umbrella liability policy. If the policy is cheaper/nearly the same as setting up and LLC (draft fees, filing fees, and annual fee), then I think it would be beneficial to do instead of the LLC. Because in the event of a large lawsuit my saftey barriers would be renter insurance, landlord home owner insurance, umbrella liability insurance, then my own personal assets (including rental property).

If I skipped the Umbrella insurance, then I have a higher chance of totally losing my investment property, with much lower chance of losing my personal assets.

My decision really hinges on the cost of the umbrella insurance policy. *Edit - Looks like average $1,000,000 liability insurance policy can start around $300 annual*.

Update** Looks like annual fee for an LLC is $25 (yearly renewal). So maybe I will consider both. TBD for now.

[TexasHusker]

I am looking at buying more real estate, but working through Fannie Mae and/or Freddie Mac, I can only buy the homes in my own name. Of course, I don't know that there is anything that would keep me from re-titling them to an LLC or Corporate after the fact.

An LLC is uber cheap to set up. You can do it at Legal Zoom for almost nothing. Accounting fees are but a couple hundred $ per year.

For now, I'm keeping all my real estate in my name, keeping good insurance on each property, and keeping an good umbrella policy in place.

[amarowsky]

I am looking at buying more real estate, but working through Fannie Mae and/or Freddie Mac, I can only buy the homes in my own name. Of course, I don't know that there is anything that would keep me from re-titling them to an LLC or Corporate after the fact.

An LLC is uber cheap to set up. You can do it at Legal Zoom for almost nothing. Accounting fees are but a couple hundred $ per year.

For now, I'm keeping all my real estate in my name, keeping good insurance on each property, and keeping an good umbrella policy in place.

It's good to finally hear someone who doesn't have one in an LLC as well.

I just wanted some validation from what my Tax accountant said. And it really seems, that as long as it is insured properly, that everything will be covered under >98% of legal circumstances.

This makes me more confident to move ahead.

I think we will strongly look into the LLC more ahead, fully planning on putting one in place. But currently, it doesn't seem important enough... Especially because the lender (in my case) can call the loan due in full. Which would put us into a more of a time crunch to move assets around to pay it off.

[TexasHusker]

I think you do have more risk having things in your name versus an LLC. If someone was killed or mamed on your property - due in whole or part to your negligence as determined by a court - they could sue the LLC and theoretically drain the LLC of every penny if awarded by the court. But they likely couldn't get to your personal assets.

If the same occurs and the property is in your name, theoretically they could be awarded an amount well above your umbrella policy. Unlikely, yes, but impossible, no.