Any advantage to signing a lease in the name of an LLC? Accountants/Lawyers/Businesspeople/Interested passersby welcome! (1 Viewer)

[Long Ball Larry]

Looking to a rent a space for a business.  Landlord sounds like he would let us put the LLC as the renter's name with a personal guarantee of liability.  Is it better to having the agreement and the rent be paid in the name of the LLC?  Or does it no matter?

 

[-fish-]

Limited liability.  It's right there in the name.   

 

[Long Ball Larry]

Limited liability.  It's right there in the name.   

Right, but the landlord doesn't want the lease to be in the name of our LLC because it limits his options if we break the lease.  That is why he would want a personal guarantee clause in the lease.  Assuming we accept the clause, is there any other advantage to having the lease in the name of the LLC vs. us personally?

 

[Tom Hagen]

How many members are there with an ownership interest in the LLC. How does the LLC file for income taxes?

 

[Long Ball Larry]

How many members are there with an ownership interest in the LLC. How does the LLC file for income taxes?

1 (my wife)

LLC is new this year, but I assume everything will be part of joint tax return.

 

[Tom Hagen]

1 (my wife)

LLC is new this year, but I assume everything will be part of joint tax return.

In that case it probably will not make a difference for tax purposes because the LLC is considered a disregarded entity for income tax. If there were more than 1 member or the LLC filed as a corporation you could potentially have a problem deducting the rent if the LLC wasn't the lessee.  

I can't speak to the liability difference but my guess is that you want the lease in the name of the LLC in case someone slips and falls in the leased space. The LLC won't get you off the hook for the rent if you personally guarantee the lease, but it might help against other types of liability

 

[-fish-]

Right, but the landlord doesn't want the lease to be in the name of our LLC because it limits his options if we break the lease.  That is why he would want a personal guarantee clause in the lease.  Assuming we accept the clause, is there any other advantage to having the lease in the name of the LLC vs. us personally?

No. A personal guarantee defeats the purpose.

 

[mr roboto]

No. A personal guarantee defeats the purpose.

With the LL yes. But, in general it’s probably worth it. 

 

[kutta]

In that case it probably will not make a difference for tax purposes because the LLC is considered a disregarded entity for income tax. If there were more than 1 member or the LLC filed as a corporation you could potentially have a problem deducting the rent if the LLC wasn't the lessee.  

I can't speak to the liability difference but my guess is that you want the lease in the name of the LLC in case someone slips and falls in the leased space. The LLC won't get you off the hook for the rent if you personally guarantee the lease, but it might help against other types of liability

I agree with this. It’s not going to help on the lease itself, but it will help if there’s an incident on the property and you get sued.