Why You Should Be Using an LLC to Protect From Liability Claims on Renovations
Summary
This article from BiggerPockets discusses the importance of forming an LLC when renovating your short-term rental property. It explains how an LLC can protect your personal assets from liability claims arising from renovation work, such as contractor injuries or property damage. Hosts should consider forming an LLC to mitigate risk and protect their personal finances, especially when managing renovations themselves.
Key Insights
- •When a contractor orders renovation materials, the supplier has a lien on part of your home equal to the cost of the materials. If a contractor, for whatever reason, ends up not paying the supplier, the supplier can sue you for the cost, or, in the worst-case scenario, force the sale of the property to cover their costs.
- •If you own a renovation property in your own name, you are personally responsible for any legal claims filed against you. You can then stand to lose anything you own, including your savings, any other investment properties you own, or even your home.
Action Items
- ✓Make sure your LLC is run diligently and conscientiously. Avoid mixing personal and business expenses, for example, by using your business bank account for your personal bills.Effort: lowImpact: high
- ✓Consider forming an LLC for your investment properties, especially if you are managing the renovation work yourself.Effort: mediumImpact: high
Tools & Resources
- →LegalZoom: This article is presented by LegalZoom.
Common Mistakes
- ⚠If you start mixing personal and business expenses, for example, by using your business bank account for your personal bills, you are breaching that legal LLC shield, potentially opening up your personal assets to litigation after all.
More from Regulations & Compliance
The Green Bay Common Council will consider changes to its short-term rental ordinance. This could involve new regulations or revisions to existing rules. Hosts in Green Bay should stay informed about potential updates and how they might impact their operations.
Local commissioners denied a short-term rental application, suggesting potential regulatory hurdles for new STR operations. This indicates increasing scrutiny on STRs within this locality. Hosts should be aware of potential local restrictions and permitting requirements before investing in or launching short-term rentals.
The Green Bay Plan Commission is updating its short-term rental ordinance. Details are not given, but this news signals potential changes for hosts in the area. Hosts should stay informed about the new regulations to ensure compliance and avoid penalties.
Curated by Learn STR by GoStudioM