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what's going on you guys in today's video we're going to talk about should i get an llc for my airbnb business or should i just put it in my personal name okay let's dive into itall right first and foremost let me be super super clear about this i'm not a lawyer this is not legal advice i'm not a business expert by no means this is just how i like to do it this is what i have learned in my past i do have a lawyer and i do have an accountant i talk to them about llcs all the time so i'm just sharing very quick information do your own research definitely talk to a lawyer talk to a bookkeeper talk an accountant talk to any other investors do your own homework so again be very clear i am not legal advice here just telling you what works for me so since i do get this question all the time so i teach a webinar once or twice a week on how to start an airbnb business and like i said one of the most common questions is should i get an llc or should i not now let me first explain what an llc is to the best of my ability which i understand you can look it up an llc is a limited liability company basically what an llc does is it takes you out of liability a little bit it protects you more and it protects your assets so if you put a home in an llc it's in that one llc hopefully it will protect you obviously you still have to obey by the laws and be legal and all that other stuff but an llc just kind of gives you a little bit more of a protection and if you're doing this as a business you do want to protect yourself as much as possible unfortunately things do happen and you could get sued so why not spend a little time and energy and money to protect yourself as much as you possibly can okay let me run you through a scenario on llc's and kind of like how i did so let's say you have property a and you have property b you have two homes they're both on vacation rentals you rent them out all the time you have guests coming and going so you want to get an llc on property a so let's say llc number one on property a then you get another llc on property b and then what happens basically is from my understanding is let's say someone at property a falls down the stairs and breaks early god forbid that happens but if something like that were to happen then they can only sue you on property a under that llc they can't come after your other property and your own personal assets and you as well they could only go after what's what's covered under that llc make sense now when creating an llc you got to ask yourselves is it worth it for you right it's not cheap to set up an llc i go through a lawyer i like to work with a lawyer to make sure it's even set up like perfectly and i don't miss anything so i have to hire a lawyer and for them to file an llc we have to come up with a name and all that good stuff so it's typically anywhere from 500 to 800 is what i pay here in arizona when getting an llc i would also recommend having the llc in your own state so like i'm currently in arizona i have properties in arizona so i went ahead and build my llc's in arizona i do have another property in california and i have a separate llc in california that covers that property now is an llc right for you let me walk you through a couple scenarios that may work for you let's say you're just now starting this venture in short-term rentals and you just want to rent out a room in your house you have one bedroom in your house and you just want to rent that out make the couple extra bucks i don't think that would necessarily help you to get an llc for that one room you might want to get some other kind of contracts or something but definitely check with your lawyer on that i really don't think you need to spend all the money and time to get an llc if you're just doing a shared room and a little bit more part-time another scenario number two let's say you have a vacation home i'm in arizona let's say you have one property here in scottsdale and you use it sometimes but you mostly rent it out on airbnb i would personally recommend getting an llc that's how i have mine set up that way i know my guests are covered i'm protected they can't come after me and i put that llc in that property alone so let's say one of my properties is called the beverly so i make an llc called beverly llc and then that way i put that property in that llc so if you have one it might be definitely worth getting an llc okay scenario number three for getting an llc deciding if you want to or not if you plan on growing this business or you're already at that level let's say you have multiple properties multiple vacation rentals you have one here you have one out of state you have one in different counties then i would probably 100 recommend getting an llc to me that would be worth it now you can set it up multiple different ways there's some people that say put an llc up to a million dollars worth of assets in one llc i personally like to set up each home in a different llc and then every time i buy a property i put in that llc the titles in that llc i run my business through that llc etc so multiple properties i would probably recommend doing that but again check with an expert now i'll kind of break you through my scenario and hopefully that will help you guys on better understanding llc the purpose of it and if it's right for you or not right for you so in my business i have one llc that's called hildy homes that's my company that's my forward-facing company they're the management company they do the marketing everything i do own that llc so i put it in the llc then i have property a property a is in a different llc underneath my main company llc so let's say it's beverly llc i just bought another property that i'm remodeling right now and i'm putting that again in a different llc so every time i buy a new house i put it in an llc and i put the title of the llc in my home keeps it really really clean another thing i really like about the llc is i can have separate bank accounts for every single property that way for me i'm not that organized and it keeps it more organized i pay everything on that house so let's say on house number a is in llc number a all my accounting stays in that one llc i have a credit card now my bank account whenever i make income it goes straight into that property it's super easy and then every few months i'll pay myself from that llc so that's kind of the way i like to do it okay that was super brief i just wanted to cover the super super basics of an llc but again check with your lawyer reach out to me if you have any other questions if you want me to dive into more on how i really set up all this but again smash that like button and subscribe and share the video with a friend if you want all good see you next time you
Thanks for your comment Ernesto Abbate, have a nice day.
- Fleta Zbierski, Staff Member
hey YouTube how we doing it's Richard found a short-term rental university and Airbnb super host today's video is the importance of LLC asset protection when you're running a short term rental business but first and this is really important like Astrix charles footnote whatever you need I'm not a lawyer I don't play one on TV don't listen to this guy seek your own advice and in fact I took a piece of my own medicine and we did exactly that so just yesterday I interviewed Clint Coons who is a lawyer about the importance of asset protection and how somebody could be on the right side of the law and the wrong side of the law and what the risks are and so on in running a short-term rental business and as you might imagine there's an awful lot of liability and so you want to make sure that you're protected so big shout out to Clint thank you so much listen to the podcast that's public everyone can listen to that and as an added feature he was kind enough he spent over an hour speaking to our paid members at short term rental university and he answered their very specific questions so thanks so much Clint that was huge value added really appreciate it but let's get to why this is important first off hopefully you never find yourself in a situation where you get sued hopefully you host and nobody ever gets injured or there's no problems however hopefully isn't really a sound business strategy in fact I would urge you to put that away and instead be diligent and plan and speech your own attorney to make sure that you're protected because here's the deal unfortunately at least here in America which is where I live and I know most of the laws we're in a very litigious society so if somebody gets injured on your staircase or in front of your building even if it's their own fault and Clint gave us some examples about somebody who was in a no-smoking apartment and lit a cigarette in bed and fell asleep and had disabled the smoke alarms so that it wouldn't go off you know all the nightmare scenarios that doesn't mean that you can't be sued and whether you're found guilty or innocent doesn't really matter that suit itself that process is really gut-wrenching and emotional and takes a lot of time and energy not to mention legal fees so what you want to try and do is make sure that as as possible you're complying with all of the different laws and then you can't be found guilty but then you want to take one additional step and just make sure that your property your assets that you've worked so hard for are protected and some of the things we talked about are like holding title in an LLC a limited liability company and Clint suggested that the actual property be held in LLC in your state so wherever that property is let's say it's in New York or Colorado or Florida instead of getting one and say Delaware or Nevada which have really good LLC protection he recommends getting it in the local domicile so that you can file taxes and you're in compliance with those states again I'm not an expert but these are just some tips that we're passing along so let me take a step back and just explain what an LLC is as far as I understand it and it's basically a limited liability company and whatever assets that LLC owns it controls and can be sued and so by way of example has just used two different properties you have property one in LLC one and property two in LLC two if something god forbid were to happen in LLC two it doesn't prevent you from being sued but LLC two would be sued and if they found you guilty all of the assets from LLC two could be a total loss that entire home if that owns a car if there's cash in the bank account like whatever LLC to owns could go to pay the lawsuit okay but LLC one is completely unaffected and completely yours going forward so it's basically a way to compartmentalize your risk and separate your assets nothing is foolproof and you can't do anything silly or break the law but imagine without the LLC protection if you got sued because something happened in property two and they wanted all of the money and income and the property associated with property two plus everything in property one that's a total loss and from my perspective a 50% loss where there was an incident is so much better than a hundred percent loss where there wasn't even anything to do with property one so now let's try make this really practical and helpful for you should you have an LLC well first off they're not without costs you have to file an LLC there's typically costs involved in that it can range from say a couple of hundred dollars to even a thousand or more and then there might be annual filing fees and then there might be annual tax preparation fees so this little bit of insurance isn't a no-brainer and it's not for everyone that said it's a really great investment for you as you start to grow your business so let's cover three different scenarios as we did in the podcast the first is if you have a shared room in your property and that's what your air B&B business is well if you have one property and you're renting out a room it's unlikely that an LLC is gonna give you much protection because likely you only have that one home and that one room so it doesn't really do very much for you it may not be worth your while at this stage in your real estate career but you may aspire to it again I urge you to speak to your counsel they may have a different take on it the second one is now you have a vacation home so it's a property that you stay in sometimes and you also air B&B or short term rent you know when you're not there which means that when you're not there you have another property maybe you own a condo in Miami and that's where you live and then you have a house in the ski area and you rent that out on VRBO well those properties you may want to have LLC's for so that God forbid the handyman in Miami when he's changing the light bulb and he falls isn't now suing and trying to get your ski house or vice versa your tenant in the ski house slips and falls it's icy you didn't you know plow the driveway and he Sue's you they can't come and try and attach your place in Miami so that's an area where I think it makes a little bit more sense and then finally if you're a small real estate entrepreneur and you have multiple places multiple homes multiple assets now it's starting to make a lot of sense from my perspective and that's what I do I currently own all of my individual properties in individual LLC's again trying to compartmentalize the risk god forbid something happens in property one property five goes on and lives another day so to be fair I'm really just scratching the surface these are just very basic concepts that I'm trying to share with people and educate people on because a lot of the members on the podcast and also the paid members that we're listening to Clint found it incredibly valuable and I want to share that with you but recognize people you know have studied this for years there's case law there's things that are particular to your state and your situation so I really encourage you to speak to your counsel try and figure out a
Thanks Karry your participation is very much appreciated
- Fleta Zbierski
About the author
I've studied jewish law at Lincoln College in Lincoln and I am an expert in biophysics (outline). I usually feel dark. My previous job was custom tailor I held this position for 19 years, I love talking about billiards and texting. Huge fan of John Travolta I practice cycling: bmx) and collect police memorabilia.
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