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The Dean Law Firm Blog

Tuesday, May 17, 2022

Do You Own a Rental Home? Then You Need an LLC!

Owning a rental property may seem like a good way to earn an income stream, especially if you rent multiple properties. The rental market in Houston is surging, as the population of the City of Houston grew by nearly 10% in the last decade, according to the most recent census, and is expected to continue to grow, thus increasing the number of potential renters.

However, if you rent property owned solely in your name, then you may be exposing yourself to an enormous liability risk. If an accident were to occur on your rental property (such as a slip and fall in the shower, a pipe bursting, or an electrical fire due to faulty wiring) you would be personally liable for any damages incurred by the tenant. The tenant’s medical bills, property damages, or even a court judgment could be collected against your personal bank accounts and property. Even if you own an umbrella insurance policy covering the rental property, any judgment against you that is over the policy limit would be collected against your personal assets.

An ideal way to protect yourself and your assets would be to create a Limited Liability Company (“LLC”). A LLC would own your rental property, and you would run the operations of the LLC as the manager. If a property is held inside an LLC and you comply with corporate formalities, then you would be protected from liability if an accident were to occur on the rental property. If a renter were to sue you for an accident occurring on an LLC-owned property, then that renter could only collect a judgment against the LLC, not against your personal assets.

If you own multiple rental properties, then a Series LLC would be a good option for you. A Series LLC is like an umbrella – there is one managing Parent LLC with several individual “series” LLCs underneath it. Each individual series is also insulated from liability from the other individual series LLCs, so a lawsuit against one LLC will not affect the other LLCs in the series.

If you are interested in protecting yourself from liability from a rental property that you own, then you should speak with an experienced estate planning and business attorney.

Julia “Jules” Pullin is an associate attorney at The Dean Law Firm, PLLC, a boutique law firm practicing in estate planning, probate, guardianships, elder law, and civil appeals. Julia Dean is the managing attorney and has been recognized as a Top Attorney and Leading Advisor by Acquisition International, Forbes, Newsweek, H Texas, Houstonia, and the Sugar Land Sun, and has earned Martindale-Hubbell’s Client Distinction Award. The Dean Law Firm, PLLC, has been named “Reader’s Choice for Attorneys in Fort Bend County by Living Magazine for 2020 and 2021, “Texas’ Most Outstanding Estate Planning Boutique” by Acquisition International for 2019 and is “Best Law Firm of the Year” by Lawyer International Legal 100 for 2019.

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