LLC Question

[David Johansen]

I have been reading through the forum posts on LLCs and I am still unclear on a few points.

1- Should I use an LLC for my first property or wait untill I have a few and enough equity/cash flo to worry about? (That said I would start off with a landlord insurance policy and a PM will be doing the day to day management)

2- I have read several posts stating that banks will not lend to an LLC that is just starting out anyway which leads me to think waiting may be my best option...?

Thank you in advance for any clarity you can provide!

[Brandon Hall]

@Sebastian Gast That's not entirely true. Operating in a LLC can effect your taxes. The owner of a LLC can elect to be taxed as an S-Corp, in which case owner distributions are considered dividends not subject to self-employment taxes. A tax disadvantage of a LLC is that members are taxed on their distributed share of income even if they haven't taken the distribution. While LLCs are pass-through entities for tax purposes, those two items above will potentially effect a member's taxes.

@David Johansen I do agree with Sebastian in that you are better off just obtaining a solid umbrella insurance policy. LLCs are usually more expensive and can create accounting and legal headaches. Insurance and loans will be more costly when covering and loaning to a LLC. You are right in thinking that eventually you will need a LLC, but in the beginning, it makes more since to just purchase an umbrella insurance policy.