Forming LLC for Rental property

[Salil Prasad]

I have one rental property with passive losses. I do not have any other real estatement investment property but do I plan to invest in REIT and tax liens in future. Does it make sense to convert my rental into LLC or only when I have more than one rental property? Are there typically any tax advantages in doing so or is it primarily for asset protection?

[Fred Heller]

Not giving tax or legal advice, but here's what I learned while forming my S-Corp.

The main benefit is in shielding your personal assets against any liabilities your property may incur. Let's say someone slips on ice on the stoop and sues and is awarded $1,500,000. But your liability policy only covers $1,000,000. If you are operating as a sole proprietor, the winning party could come after your personal assets for the balance. Under a corporation your personal assets would be shielded. Your corporation may have to declare bankruptcy, but at least your personal home and other assets would not be at risk.

Good luck!