CPAs: How Important Is It To Form LLC for First Property

[Gabriel Combs]

Closing on my first property on Friday & if there are any CPAs or Investors that could tell me all the benefits of having an LLC and if I should get one for my first property over just an Umbrella policy? Thanks in advance!

[Natalie Kolodij]

1. Under the recent tax changes the 1st 20% of an LLC's profits are not taxable (there are caveats and exclusions). I have yet to find an insurance policy that pays my 1st 20% of taxes.

*I'm not a CPA or lawyer*

You potentially qualify for the 20% pass through regardless of if you have a LLC or not. (Just no C corp QBI )

That's also not how the deduction works. 

The answer is: Tax wise, it literally makes NO DIFFERENCE. There is no preferential tax treatment with regard to LLC vs. non for a rental property.

If you're doing flips or wholesaling there could potentially be. 

The purpose of an LLC is to separate your business from personal assets. However, many people intermix business/personal expenses and don't maintain business books well enough to keep from breaking that corporate veil any way.

So the answer is talk to your attorney, see if it makes sense for you and your circumstance. It's a tool just like any thing else, it's not some golden end all for liability.