Should I create a company for my rental properties

Question

I heard some people have their own companies (LLC) for their rental properties. Is it necesary to do so? Is there any tax or other benefits by having a company? I just began to learn real estate investment and becoming a landlord. I appreciate your advice!

Account Closed · Answer

I agree, tax wise, the S-corp can help a little, but it's not worth doing it just for tax reasons only.

If it's l'iability' reasons, YES.

Now, if you are worried liability wise, you can do a 'title holding trust' with the beneficiary as the LLC or S-Corp. Which passes through to you as the final beneficiary. Which you will have to have a Living Will & Trust in place.
At this point, if a tenant or neighbor of your property wants to sue you, it take about 25-30k retainer just to get the lawyer to take it on. So they aren't going to get one of those 800# lawyers to represent them.

Tip 3: (Sorry, just started numbering the tips).: Any time you have more than a 20%+ equity in a property, open a heloc. This will put a lien on the prop even if you don't spend a dime of the heloc. This makes you look poor to public records even though you might be equity rich!!!
The last tip is great if you aren't using trusts, been using it since the early 2000's, well, didn't have much on the equity side in the 90's.

Robert Adams · Answer

Details on LLC's can vary per state I would get advice on the best way to protect your assets and to get the best tax benefits by talking to a professional in your state.

Andy Chu · Answer

The use of LLCs are not so much the tax benefits, but for the asset protection benefits. Let's say you have a property with a tenant, and the roof collaspe on the tenant. In theory, they cannot come after you as an individual, but only what is inside that LLC bubble. This is all dependant their attorney not piercing the LLC bubble.

Kyle Meyers · Answer

Some landlords use LLCs to limit their liability and you can find dozens of discussions on that topic on this site. As for the taxes, the IRS does not recognize LLCs, and you must elect to have it taxed as either a corp or a partnership. If it is taxed as a partnership, your taxes on rental income will be virtually the same as without any entity.

The decision of forming a company for your investing will depend on your individual situation, speak with an attorney and a tax adviser.