I don't see the benefit of an LLC - if liability is the issue....

[Cameron K.]

I'm an owner of a 4-plex, I've had for 10 years now. It was a condo building, each unit having its own address and deed when we purchased. It's doing very well and one of the units is an Airbnb. My husband and I have just owned and managed the building for years now. However, we have heard dozens of times the advice that we should put the building into an LLC - with each unit in an LLC.

After researching..... I just cannot see the benefit of all these LLCs. If the issue is protecting our assets in case of a lawsuit, it seems like a good umbrella that covers our "net worth" will do the trick. I understand that if someone goes after us with a lawsuit, someone can get the equity of all the units if they win the lawsuit. With each unit in an LLC, supposedly it separates each entity and the person suing could only go after the equity of one condo. OK, I got that.

It has come to my understanding that if you don't account perfectly for expenses, a lawyer can argue that the LLC ultimately leads to me and my husband, and that our personal assets would get compromised anyway. Or, if I purchase another property under my own name and then transfer it to an LLC, the lines between personal finances and business finances wouldn't hold up in court anyway. It just seems that the LLC is a fragile line between personal and private monies, but that it can be easily argued against.

Overall, It seems like an LLC is fancier, more "clean" and official and separate. However, we would go from passive income as landlords to having to pay self-employment taxes, plus commercial insurance (which is double the cost), plus all of the costs of setting up these LLCs, plus added taxes, etc.

I manage the property and do basic repairs, but everything else is contracted.

So, for all you real estate gurus...

Can anyone explain why to do an LLC?

I am seriously leaning towards the insurance route.

Thanks!