In this NBC Seattle interview, CPA‑attorney Mark J. Kohler explains how Washington rental and vacation‑rental owners can protect themselves legally and financially. He notes that many owners simply hold properties in their own name or use a one‑page LLC filing, leaving them vulnerable to lawsuits. Kohler outlines the essential elements of a properly formed limited liability company—obtaining a tax ID, opening a dedicated bank account, placing the property title in the LLC, and executing leases in the LLC’s name. He warns about “piercing the corporate veil” when these formalities are ignored, which can expose owners to personal liability. He stresses the importance of annual LLC maintenance (meetings, record‑keeping) both to preserve protection and to generate tax‑deductible expenses. Kohler advises against placing a personal residence in an LLC and cautions against the common misconception that forming an LLC in Nevada, Wyoming, or Delaware offers superior protection for Washington‑based rentals; instead, he recommends forming the LLC in the state of operation and registering it as a foreign entity if needed. He encourages landlords to consult a lawyer familiar with rental property law, consider a low‑cost maintenance program, and adopt systematic record‑keeping. Finally, he offers renters advice on due‑diligence, emphasizing safety concerns such as hidden cameras and the importance of using reputable platforms and checking reviews.
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Hey.
Alright, so check this out. Joining us today is Mark Kohler, a CPA attorney and author of the book the Tax and Legal Game Changing Solutions for your Small Business Questions. Heck of a title, but pretty cool. He's also a national lecturer for entrepreneurs and real estate investors around the country. And he's here joining us this morning. Welcome. Thank you for being here, Emily.
Thanks for having me. Love to be back.
We love having you here because you put things so simply that we can all really understand. And today we are talking about people who are in the rental and property business and basically how they need to kind of protect themselves. Know more about how to protect themselves legally.
Yeah. In the state of Washington now, just in vacation rentals alone, they estimate close to 200,000 rental properties. Wow. And then you have your regular rental properties and so many owners just put the property in their own name. They may not even set up an llc. They get some insurance, but of course they don't want to talk to their agent because the premiums might go up.
Right.
And so everybody's just like, oh, I need as much cash flow as possible. But one problem, one accident with a tenant and train wreck.
Yeah. So what is an LLC and how does someone go about setting it up? I know you and I were talking. It's not just as easy as going onto LegalZoom and filling out one sheet.
You're right. It's a limited liability company, not limited liability corporation. So llc, they don't really save you taxes. I mean, you still are going to track all your expenses and all that. They're simply there for protection. And so you want to set it up with all the pieces and parts. That's the first tip I want to give here. It's not just one sheet of paper and people are like, I'll just go online, do it myself and I'm done. Sometimes they don't even set up a bank account and then they don't even put the property in the llc. They just think that one sheet of paper is all I need. And that's where the problem is. There's more lawsuits around the country. Here in Washington, even where LLCs are being pierced, they're not even protecting people.
They're not protecting people because they're not taking all the right steps.
Exactly.
So okay, what is the problem we're seeing with LLCs and court cases and litigations? Is it just that they're poking through that people aren't doing the right steps? And if so, what are those steps?
Yeah, you bet. It's called piercing the veil, you know, it's kind of like the Bernie Madoff, you know, pierce the veil. You know, some, some owners, you know, and you don't even have to be an owner of the property as negligent or fraudulent as a Bernie Madoff. But, but that's the concept. They're going to pierce the veil and come after you personally. And you want to say, no, no, no, I got this llc, I'm tight, I set it up properly. And so some of those things are, I want to have a tax ID number for it. I want to have a bank account. I want to make sure that the tenant is paying the re. Llc, not me.
Right.
I want the lease agreement in the name of the llc and then I want to do my annual maintenance. A lot of people think, oh, I don't have to do my corporate annual maintenance. I can just set it up and forget about it. But no, you've got it. It's a good tax write off too. You don't mean taxes. Let's open that door.
Let's open that door right there. Let us talk about that. How can that help taking the time to not just set it and forget it, but maintain that LLC and be able to, you know, get a tax write off from that?
Yeah, I mean, the legal and tax go hand in hand. So once you got your protection going, then you're like, hey, this is a great write off. I'm getting cash flow. So having an annual meeting with your board of advisors. Who are these people helping you out in your life? Your spouse, your kids, your parents. Have a meeting, talk about your rental. You want to track all your expenses related to that property. Fix up, maintenance, repair, utilities, all the little things you do for your guests that come and those are write offs that could create tax free cash flow.
So should people put their own personal residences in the llc?
Good question. We don't recommend that. An LLC is built for business property, and once you have a rental, you got a business.
Right.
So let's treat it like a business, you know? And so, but with your home, you're going to use other methods to protect your own home, but not the llc.
Okay, so what do you think about. So we were, I'm just looking at this question right here. So we've all heard the rumor that set up an LLC in Nevada, Wyoming, Delaware and other states. What do you think about this? What does this.
Regrettably, I think it's, it's a scam a lot of times. I mean, Nevada has great asset protection.
Okay.
If I'm Doing business in Nevada.
Right.
But I'm here in Washington. My rentals in Washington, my tenants are in Washington, the operations in Washington. At bare minimum, you've got to register the LLC foreign in Washington. I just recommend my Washington clients. Set up an LLC in Washington. Do it right. Do your maintenance, transfer the title of the property to llc, treat it like a business. You don't need to rush off to Nevada and all that garbage.
So. So if it looks fishy, I mean, because that seems a little fishy, but I think some people may think, you know, oh, that's why I register my car in Oregon and I actually drive my motorhome around, and that's what I'm gonna do. I'm not saying family members of mine do that or anything.
Of course not.
No, no, no. But. Okay, that's a really good point. Any final tips for anybody who maybe has an Airbnb watching this segment right now and feeling maybe a little overwhelmed?
Yes, absolutely. Get that. Consult with a lawyer. Pay for a few bucks to get a lawyer that knows rental property. Make sure your LLC is in good standing. Set one up. If you haven't this. And look at those little steps to do. And we've got a company maintenance program. Most law firms should, where they'll do those little things for you for just a few hundred dollars a year. And so get a program, get a system, and then enjoy the ride, enjoy your business, live the dream.
It's such a great. It's such great advice. Thank you so much. Do we have another second? Can I ask one more question? Is it important for a renter to know if the company has an llc or is it anything that we should be checking out?
No. Good question. As a renter, boy, there's a lot of issues now using the Airbnb's as a tenant. As a renter, you're going to the city, you're going to check out this Airbnb. There's a lot of scary issues now with cameras that owners might be behind.
Right. Safety.
Yeah. So you really want to do your due diligence. Look at the reviews, make sure you're using bonafide sites to rent your vacation property, and maybe even email prior guests and ask them how their experience was.
Good idea. All right, thank you so much for being on the show again. Hopefully we see you soon.
Yep. Before you're in, tax tips.
Before you're in. Mark's going to give us tax tips, so stick around for that Again, the book is the Tax and Legal Playbook Game Changing Solutions for your small business questions. We'll be right back.
