Is LLC the Best Business Structure for Real Estate Investment

Many real estate investors have a hard time deciding which business structure to choose for their venture. A decision like that isn’t easy because different formations bring different benefits and in some cases, depending on the real estate investor’s circumstances and priorities, one is certainly better than the other. However, there’s one business structure that somehow combines the main advantages of all others. That’s the Limited Liability Partnership (LLC). Is this the best choice for your real estate investment? Let’s find out.

What is a LLC

A LLC, in its core, is a very simple business structure, in comparison to a S Corp or a C Corp. It provides owners with limited liability, pass-through options for tax purposes and many other benefits. On a consumer psychology level, it makes a business look reputable and trustworthy.

Benefits of LLC for Real Estate Investment

The perks of an LLC for real estate investors are many indeed.

• Great for foreign citizens and non-residents
• Allows passing income and losses through to the owner’s individual tax return
• Limited liability
• High legal protection of personal assets of the owner
• Unlimited number of owners, which is a big plus for many real estate investors because it helps to raise money easily.

Download Now

Downfalls of LLC for Real Estate Investment

No business structure is absolutely perfect and there will always be some restrictions or not so favorable factors to consider. For example:

• An LLC can’t issue shares of stock to attract new investors, therefore it has a limited opportunity for growth.
• You can get double taxed if you convert and existing business into an LLC.
• Some LLCs are a subject to self-employment tax
• Different states treat LLCs differently, so it is important to find out what is the best location for you and your business if you want to structure it as an LLC.

How to decide if LLC is the Best Business Structure for My Real Estate Investment

There is no universal structure that works for everyone at all times. The only way to decide what is the best option for you is to carefully weigh in the pros against the cons see how these impact your short and long-term goals. If you are unsure how to do that or you are worried that you may be missing something important, do contact a reputable tax accountant to let you on the insights that may not be visible to you. We at FAS CPA & Consultants are always happy to assist our real estate investor clients in crafting a sustainable tax planning strategy. You can contact us on [email protected].

To compare other business structures, commonly used for real estate investment, check our recent article.

Contact Us.

Request a Confidential Consultation

FAS CPA & Consultants

9000 SW 137 AV Suite 224 Miami, FL 33186 T: 786-462-7899 E: [email protected]