Using an LLC. Pros and Cons??

[Vic Vega]

Hey everyone!

I'm sure this topic has been discussed many times but I'd like to revisit it now as I'm thinking about creating an LLC for future investment properties. I'm new to buy and hold investing this year so I'm wondering if I should start using an LLC now or wait until I get to let's say 10 properties. I'd love to hear everyones input and opinions on LLC's. There a handful of questions that I have from the start...

Tax implications/benefits?

Legal protection?

Fees and expenses associated with LLC?

Can properties in my name be retroactively into an LLC?

Any benefits to putting my Wife's name on the LLC also? Women owned benefits?

General pros and cons?

Thanks!

[Irina Belkofer]

Originally posted by @Thomas S.:

Cons: It is expensive, your taxes will be higher, loans more expensive, annual fees.

Pros: None yet proven by any BP member.

If you really want to protect yourself have adequate insurance and stop buying with cash. Paying off properties places a huge target on your back regardless of whether you have a LLC or not.

Totally wrong: it's not more expensive than to operate as a person vs LLC, for tax purposes it's a disregarded entity if you're 100% owner, loans more expensive because it's commercial loans not because you're in form of LLC, no annual fees at all.

Pros: your name is not searchable on auditor site, it's give your assets protection if you're not co-mingling money, you can build separate credit history for your LLC (for example, I have 2 credit cards for my businesses and they are not on my personal credit report - just on EIN).

Depending on how you structure your businesses, you might decrease taxes - rental business is on sch.E while main business on sch.C and you can manage cash flow between them).

Besides, it gives your money protection from claims on your personal liabilities (unless you QCD your properties back and forth to get a loan). 

Yes, you will have to have your property on your name if you're buying your primary residence or second home. In the case of rentals you will get the loan in the name of LLC