It’s important to consider how to structure your real estate ownership– especially if you’re an investor. Instead of personally owning real estate, you can form a limited liability company (LLC) to house your real estate ventures.
An LLC is governed by state laws and is a legal business structure. This can help protect your personal assets in case an investment goes wrong.
As you evaluate forming an LLC for real estate ventures, you should consider four key factors based on your specific circumstances. Here’s a look at those factors and how they might apply to you.
1. Liability Protection
The purpose of forming an LLC is to limit the liability that the LLC’s owners face. For owners, an LLC provides some separation between personal assets and assets housed within the LLC.
In the case of facing litigation or creditor collections on behalf of your real estate ventures, your personal assets would be protected.
The courts can rule against these protections in rare circumstances, such as situations where the owners don’t keep personal and LLC finances separate. So in order to keep your liability protection, it’s vital to follow all state laws for your LLC.
2. Tax Benefits
Another consideration for forming a real estate LLC is the tax benefits. Both single-member and multi-member LLCs can use pass-through taxation. That means that the money earned through your LLC is not first taxed as a business and then taxed once the owners get their share of the money. This can mean lower taxes compared to other business structures.
For those with simple taxes and a singular mortgage, the tax benefits may not be as great for creating an LLC for real estate. Multi-owner LLCs are the ones who often see the greatest tax benefits from such a structure.
3. Keeping Details Private
By forming an LLC, you can keep information about the real estate you own private. That way, individuals can’t learn your personal home address or even your identity.
Keeping details of your real estate ventures private can help keep your assets protected in case you ever face litigation. Not all states provide total anonymity for LLC owners, but there are ways you can structure your LLC to keep the details as private as possible.
Ask your real estate attorney about how rules for real estate LLCs apply in your area and what information you can keep private.
4. Custom Ownership Terms and Structures
If you have multiple owners in your real estate ventures, an LLC allows you to structure the ownership terms in a pleasing manner for both you and the other owners.
This allows you to define how you’ll divide proceeds among owners and who can make decisions related to your venture. You can also outline tax structures and decide whether or not to host annual meetings.
Discuss with your attorney the many options an LLC provides in structuring your venture. You might create more than one entity to allow for further flexibility in who manages and benefits from the LLC.
Contact Generations Law Group For Help Forming an LLC
To ensure that your LLC is structured and filed properly, you should work with an Idaho business attorney.
The team at Generations Law Group will help you protect your assets and outline how proceeds are distributed. Book an appointment with us to learn more about how an LLC can protect your real estate ventures.