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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 for your comment Clement Lambiase, have a nice day.
- Jannette Brookshier, Staff Member
llcs it blows my mind how many people ask me questions about llcs and it seems to me that most of you get stuck in this process when starting your airbnb business llc's should not be complicated so i decided to gather up all the frequently asked questions about llc's and i'm going to help you answer those questions in this llc q a video my name is greg and i manage an airbnb business where i myself had the same questions when i was brand new to this business i'm not an expert on this subject but i will share what i know about llcs at first it may sound complicated but if you do a little bit of research you will start to understand that it's not as scary as it seems just a quick disclaimer before i start this video this is not legal advice i am not a financial advisor nor am i an attorney i recommend you to speak with a tax professional or tax attorney before performing any of the strategies mentioned in this video now if you enjoyed this video please give it a thumbs up and subscribe to the channel so without further ado let's get right into the video the first question i want to help you answer is what is an llc first of all an llc stands for limited liability company an llc is one type of legal entity that can be formed to own and operate a business this business structure limits the liability to the members themselves from any liabilities or debts from the llc meaning it separates you from the business and that's good in case a business gets into a lawsuit your personal assets are not going to be liable now as far as that goes should you create an llc before you start any form of business technically speaking you do but it all depends on you and what type of business you're starting the way i see it is if whatever you're doing is making you money i would get an llc to turn your hustle into a legitimate business now if you're making an llc for a business that you haven't started yet and you have no idea if it's going to work why make one why not use that capital to get that business up and running first and then decide what entity will fit best with that business whatever the case might be if you're starting a brick and mortar business for the most part you might need to get an llc first but if you're starting a side hustle where you can make money online you can get away with starting your llc later in my case when i started my airbnb business i didn't get my llc right away i waited until i saw that my business was working and decided to take some of the profits to file an llc so if you're wondering if i signed the lease under my llc or my personal name i signed it under my personal name first and then later i signed the lease agreement under my business name so in my opinion i don't really think it matters if you start a business without an llc as long as you get it later down the road when you see that your business is working so let's start this llc q a by answering some of the questions that i get on my youtube channel so let's start by answering the first couple of questions that jorge left us here and the first one is where can i go get one i'm assuming he's talking about an llc right so there's a bunch of different ways that you can get an llc the the easiest way that you can get one is if you go to legozoom.com that's the way i did it you know it took me a couple of minutes it was basically just answering yes or no questions and at the end you just have to pay the legal zoom fee and the state fee that you have to pay and that leads us to the next question which is is there a fee yearly monthly so as far as i know there's only a yearly fee okay so when you get your llc you have to renew it every single year now the next question he's asking is is this the very first step i will take before trying to own duplex or bnb okay so if you're trying to own a duplex for example if you're trying to purchase something i recommend maybe putting putting your property under an llc and uh if you're starting rental arbitrage on the other hand you don't necessarily have to have an llc you can always get it later like i said before or if you want to just get it out of the way you can also do that as well so it's totally up to you of how you want to do it but i recommend you guys to talk to a local cpa or someone that can give you legal advice on this whether or not you need to get an llc first to operate this type of business now the last question she's asking is how long is llc good for so like i said before guys uh every year you have to renew it if you don't renew it it expires and basically the llc is not active okay now before i move to the next question i want to give a quick shout out to paul rich for hooking me up with this amazing watch you know that as a businessman or businesswoman you have to look professional anywhere you go especially going to those business meetings networking events or even pitching landlords about the great idea of airbnb a good way to stand out and give a good impression is by having a nice watch now you don't have to break the bank to buy a nice luxury watch our rich designs good quality luxury watches for both men and women at an affordable price so i decided to team up with them so they can give you an extra 15 off when you use my coupon code at checkout right now they're having a big sale on all their watches and if you include my discount you can get a great deal this is a perfect gift for the holidays you can't go wrong with gifting someone a watch i'm a big watch guy and out of all the watches i've owned by far this is my favorite one so check the link below and check out paul rich watches they offer a 2 year warranty and all their watches and free shipping i appreciate them for sponsoring this video and for giving you guys an extra 15 off when you join the porridge fam now with that being said let's continue this q a okay so now the next question is by aaliyah and it says hey there i have llc here in california but i'm interested in becoming an airbnb host in atlanta very lucrative cheaper cost of compared to los angeles is it possible for me to sublease an apartment under my llc in another state great question so when doing airbnb and if you want to have for example an llc in the state of nevada but you want to get a property in california you can technically still use the same llc it doesn't have to be from the same state so that's currently how i do it my llc is from the state of nevada but i have properties in california and i've been doing it ever since and i'm still doing okay so if you want to get an llc from a different state just because it's cheaper just make sure you do your research i'm pretty sure you have to pay like some sort of foreign fees at the end of the year but if it's cheaper to get it in another state go ahead and do so it's totally fine moving forward to next question is from assaya hi can you do a llc with a group of three people who might want to start a business together and if not what is a better option thank you okay this is also a great question so when you're starting an llc with two or more people you will need to do an llc partnership all you have to do is just on
Thanks Gene your participation is very much appreciated
- Jannette Brookshier
About the author
I've studied control systems at Aquinas College in Grand Rapids and I am an expert in immunochemistry. I usually feel high. My previous job was materials scientist I held this position for 11 years, I love talking about creative writing and billiards. Huge fan of Ciara Wilson I practice sky surfing and collect hockey cards.
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