To LLC or Not to LLC

[Christine Stone]

Hello BP Friends! I'm ready to look at starting an LLC for my properties, but I've heard mixed advice about their necessity and benefits. I would be starting the LLC as a disregarded entity and reporting my profit/loss on a Schedule C. My main questions are:

• What are the biggest benefits of LLC's?
• Are there any reasons I shouldn't start an LLC?
• Will I be subject to additional taxes with an LLC?
• Is it advisable to have a separate LLC for each property?
• Can I form an LLC for my primary residence? (I'm currently house-hacking.)

Thanks in advance!

Christine

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[Nicole Bernshaw]

What are the biggest benefits of LLC's?

• Asset protection

Are there any reasons I shouldn't start an LLC?

• If you have no real estate property, you have no need for an LLC

Will I be subject to additional taxes with an LLC?

• The tax on profits of a sale is carried to the individual(s) who own the LLC. Profits are taxed, no matter what, except if you opt for a 1031 exchange.

Is it advisable to have a separate LLC for each property?

• Because the main benefit of an LLC is for asset protection, it is advisable to protect properties with sizable equity separately. This discourages sue-happy people from going after your hard-earned assets.