LLC’s: Best Biz Structure to ‘House’ Multiple Properties

775_4478679I’m often asked if real estate investors need to create a separate Limited Liability Company (LLC)  for each investment property they own, or if one LLC can cover them all. My answer is typically yes — create an LLC for each property. In fact, many investors and builders name each LLC after the address of the property, i.e. “123 Main Street, LLC.”  This practice will give you the greatest amount of liability protection for your real estate investments. Let’s back up a bit and remind ourselves why an LLC is so important in the first place.

As a recap, in an LLC, the owner’s personal assets are shielded from business liabilities just as they would be in a Corporation.  In addition, the IRS views the LLC as a “disregarded entity”. Thus, an LLC does not file separate taxes; company profits and losses flow through to the owners and are subject to each owner’s individual tax rates. The LLC is great for a business that wants liability protection, but seeks minimal formality.  It’s also the perfect structure for a business with foreign owners since anyone (C Corp, S Corp, another LLC, a trust, or an estate) can be an owner of an LLC. With any property, there are inherent liabilities — from a broken balcony railing to old electrical wiring or mold. The LLC forms a wall that shields individual owners from personal liability. If sued by a tenant or guest, the defendant is the LLC, not you. And the judgment can be collected only from the LLC’s assets, and not from your own personal assets.

Now getting back to the case of multiple properties. For example, let’s say you purchased a few rental properties and deeded them both to your LLC (named My Properties, LLC). An unfortunate incident occurred at one of the properties and your tenant was awarded a large settlement. In this case, the judgment can be collected from any of the assets owned by My Properties, LLC — this includes both the property where the accident occurred, as well as your other rental properties included in the LLC. By setting up distinct LLC’s for each property, you can protect each investment on its own. If Property A is sued, only those assets belonging to LLC A are affected. Your own personal assets are shielded, as well as those from Property B, Property C, etc.

While setting up and maintaining multiple LLC’s may seem like a hassle, taking that little extra time upfront will help you make the most of your investments and avoid any legal pitfalls in years to come. Of course, details may vary based on your specific circumstances. However, in most cases the LLC is the ideal business structure for your real estate investments to protect your real estate assets and offer the maximum in tax benefits. If you decide to proceed in forming an LLC for any of your real estate investments, you will have to file Articles of Organization with your Secretary of State to bring the LLC into existence. CorpNet’s professional staff is here to assist you every step of the way… And once you know what you’re required to file, we can take care of the details for you!  If you have specific legal questions or concerns, you should consult an attorney for sound advice. After all, your business is worth it. Please feel free to reach out to me with any questions to nakalp@corpnet.com. I wish you the best of luck in all of your business endeavors!:)

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2017-09-08T10:13:36+00:00 March 1st, 2011|Categories: Startup and Launch|Tags: , , , , , |

About the Author:

Nellie Akalp
Nellie Akalp is an entrepreneur, small business expert, speaker, and mother of four amazing kids. As CEO of CorpNet.com, she has helped more than half a million entrepreneurs launch their businesses. Akalp is nationally recognized as one of the most prominent experts on small business legal matters, contributing frequently to outlets like Entrepreneur, Forbes, Huffington Post, Mashable, and Fox Small Business. A passionate entrepreneur herself, Akalp is committed to helping others take the reigns and dive into small business ownership. Through her public speaking, media appearances, and frequent blogging, she has developed a strong following within the small business community and has been honored as a Small Business Influencer Champion three years in a row.

4 Comments

  1. Ben Fernandez May 22, 2011 at 3:29 pm - Reply

    Hi! I am interested in incoroporating the rental property I own and the next purchase I am going to make. I want to start an umbrella that I can utilize for all my real estate ownership. Is a series LLC a good option and how does this differ from setting each location up individually as an LLC? Would I save time and money by doing the series LLC? I am intesested in a C corp as well, if I go public later and the tax benefits a C corp has, but I am questioning which one is better.

    I appreciate any help you can offer. I am looking to complete my incorporation soon. I also want to incorporate out of Nevada or Wyoming…

    Thanks for your time.

    Feel free to call me (773)791- 5737

    • Nellie Akalp
      Nellie Akalp May 23, 2011 at 11:38 am - Reply

      Hi Ben,

      Thanks for your comment! We will be in touch to answer your questions!

  2. gwen cas September 12, 2011 at 10:48 am - Reply

    hi nellie i would 2 know more about series LLC you can conttact me at 9grandrealestate@gmail.com or 323-251-1821 thank you hope to hear from you soon Gg.

  3. Ahmad Gilliard December 4, 2012 at 7:56 am - Reply

    Hi my name is Ahmad, I have several investment properties and I am looking to start an LLC. I really like the idea of having a seperate corporation for each, which gives protection for that particular property, versus placing several properties under one LLC. Asset protection is very important.

    My question, as far as banking is concerned, each individual property will have its own LLC, what will be the benefit and will there be any hardships when I decide to pull equity or refinance the property. Are there any stipulations or draw back with this?

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