Starting strategy for LLC

[Shayan Siddiqui]

Hi. I am in the process of purchasing a new rental property and expanding on this initiative in next few years. Currently, I own one rental property. Should I create an LLC at this point to protect my personal assets and tax planning? Any suggestions or comments would be appreciated. Thank you.

[Brandon Green]

Hello Shayan,

Great question, and congratulations on the start of your journey! When looking at an LLC, or any entity structuring, there are two angles to consider: tax and asset protection.

An asset protection lawyer would likely recommend a separate LLC for each rental property you own because this limits your liability in case of a lawsuit (usually to the holdings of that LLC). From a tax perspective, an LLC is a disregarded entity (meaning it is reported on your personal tax return) until you elect for the LLC to be treated otherwise. Having the LLC already in place gives you more flexibility for tax purposes further down the line.

Ultimately, setting up and maintaining an LLC comes with annual administrative costs so another thing to consider is if your cash flow is ready to support these additional costs. It never hurts to consult with a CPA and asset protection attorney. I hope this helps! I am happy to discuss this in more detail if you have additional questions.

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