Q: Do I need to start a business to collect rent on a residential property I own?
The property is in Georgia and I reside in Michigan.
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A:
You do not need to start a business to collect rent on a residential property you own. As an individual, you can rent out your property and report the rental income on your personal tax return. However, there are some benefits to forming a business entity, like an LLC, for rental properties, such as liability protection and potential tax advantages.
If you decide not to form a business, you’ll still need to keep good records of all income and expenses related to the property. This includes maintenance costs, property management fees, and any repairs, as these can often be deducted from your rental income on your taxes. Be sure to comply with both Georgia's and Michigan's tax laws, as they may have different requirements.
It's also important to consider whether the property is adequately insured and whether you are comfortable with any personal liability risks that could arise from managing the property as an individual. Speaking with a legal or tax professional can help you make the best decision for your situation.
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