A limited liability company, much like a corporation, is a business entity regulated by states that is distinct from its owners and can enter into contracts. As a result, an LLC can rent an apartment. However, even though the LLC is registered with the state, you still have to do your due diligence. You should check the financial standing of both the LLC and its owners, if possible. If you do rent to an LLC and it does not meet its financial obligations, you have legal options available to recover what is owed.
Defining an LLC
An LLC combines elements of a corporation and partnership. Like a corporation, an LLC has a liability shield. This means that the owners are generally not personally responsible for the company's liabilities. An LLC can be a flow-through entity for tax purposes. This means that instead of having the earnings of a business being taxed twice (once at the corporate level when income is earned and again at the taxpayer level when earning are distributed), an LLC's annual earnings are divided based on ownership percentage and are taxed once at the ownership level. The liability shield with the possibility of flow-through taxation makes LLCs a very popular business form.
Do Your Due Diligence
While an LLC is a legitimate business organization, not all LLCs would be a good tenant. You still need to do due diligence on the business to make sure that it can meet its responsibilities. A first step is to check with the state where it organized and make sure that it is still "in good standing." This means that it has met all of its filing requirements and paid whatever annual fees the state might assess, which would demonstrate consistency in meeting its obligations. Also, that state's secretary of state website would tell you who the chief owners of the LLC are, how long the LLC has been in existence and the LLC's chief agent. You can use this information to run credit checks on the owners and the LLC, which would provide you enough information to make an informed decision on whether to rent to that particular business.
If you rent to an LLC and it fails to meet its obligations, the process to recover past-due rent is the same as recovering from an individual. This is because the LLC is an entity comparable to a person under the law. If the LLC does not respond to initial collection attempts, you can sue it. The procedure for suing an LLC is similar to suing an individual, with the important difference being that the LLC would be named as the defendant. The LLC's individual owners cannot be named as co-defendants, at least initially, because they are shielded from liability.
If LLC Is Insolvent
If the LLC cannot pay its rent due to insolvency, you can still try to recover by "piercing the veil." This theory allows a plaintiff to sue the owners of an LLC when the owner does something that makes it seem that there is no distinction between him and the business. If the court determines that this was the case, the owners become liable for the LLC's actions, like failing to pay rent. One of the reasons a court could disregard the shield is because the LLC lacked the funds to meet its legal obligations, like paying rent. So if the LLC is insolvent, you may still be able to recover from the owners.
Tips and Disclaimer
For complex transactions, it is a good idea to consult with a licensed attorney, as he can best address your individual needs. Every effort has been made to ensure this article's accuracy, but it is not intended to be legal advice.