Should I LLC for all my investing ventures?

[Rich Moore]

Bigger Pockets has really opened my eyes to so many possibilities  and strategies of how to take ownership of my financial future.  I'm so thankful for BP and this whole community.

I'm in my mid to late forties and looking to start some investing in real estate crowd-funding, notes through PPR, and stock market investing. I'm considering doing it all through an LLC in order gain tax benefits. I'm starting out with some very modest numbers right now, but I want to start out with the wisest steps possible.

Any insights would truly appreciated. I'm in the Akron/Canton Ohio area so if anyone knows of a local accountant I should talk to that would be great too.

[Matt Vogt]

An LLC is really there for asset protection. It's a pass-through entity so I'm not sure what tax benefits you could gain. Usually people have an LLC to minimize their downside risk in the event of a lawsuit or bad business deal.

Imagine you have a 100K property, are grossly negligent, a child dies and you get sued (and lose) a 3M lawsuit. Your LLC goes bankrupt, you lose your 100K property.

Now imagine the same situation without an LLC. You get sued and lose a 3M lawsuit. You have a 1M umbrella insurance policy that covers the first 1M. They then take your property, your primary residence, garnish your wages, etc. to attempt to recover the additional 2M.

Under the LLC, your downside risk is substantially minimized (assuming you don't pierce the corporate veil).

From a tax perspective, the LLC is a pass through, meaning that your taxed the same as you would if it were held as a sole-proprietor. In fact, the LLC is going to cost more to setup (mine was around 1K in legal fees), and you'll have additional tax costs for preparation (~500/yr for a simple 1 property LLC). You'll also need separate bank accounts, separate accounting books etc. If you were to not hold it as an LLC, your expenses could still be deducted to offset the revenue, so as I said, no tax benefits to the LLC, although it may help to keep your dealings more professional and make it easier to track.

I like the LLC model, as your downside risk is substantially mitigated if you are doing things properly. It's simply keeping your eggs separate. Good luck.