LLC vs Individual Ownership

[Sanjoy V.]

Hello BP,

I know in general, most recommend using LLC when buying property to some way to limit your liability from the property.

1. Any disadvantage of LLC over owning individually?

2. Do you get less preference from lenders in terms of terms and APRs when using LLC vs individual borrowing?

3. I am assuming there is a tax benefit to own under LLC vs

[Thomas S.]

A LLC makes it more difficult to get financing and banks will still require a personal guarantee on the loan. You will be required to have a commercial loan

You will have fees and I believe taxes are higher on a LLC but not sure.

About 50% of real estate investors use a LLC, non to my knowledge on BP have required the protection and you still need insurance coverage.

LLC or insurance with a umbrella provide the same asset protection. The key to protection is to have the minimum amount of equity lying dead in a property to avoid attracting lawsuits.

[Dan Mackin]

You will have to file a tax return under the LLC separately. You'll likely need commercial loans which aren't nearly as friendly or cheap in most cases. For tax benefits you'll need to talk to a CPA. It's likely not too beneficial to you under a certain amount of income.

One of my attorneys said this about the whole LLC debate. "If you're highly leveraged on the property you're better off with the umbrella policy. When someone comes to me to try to sue a landlord I would look at the amount of equity. If they barely have any it's not worth my time. Plus piercing that veil in many cases is so easy that the LLC provides barely if any protection."