I just bought and moved in to my new place that had an attached mother in law suite that I have closed off.

There isn't much liability involved in this situation and my net worth isn't significant enough to worry too much about a lawsuit at this time.My primary focus is on the taxation, and I understand that at the sale of the home, LLC or personal does not make a difference.

These are probably tenant favored, but they will have protection for you as a landlord in the case of damages, rent payment schedule, evictions, and quiet enjoyment (i.e. they probably can't throw unreasonable parties or create a meth lab).Third, most leases have a clause that protects landlords from big lawsuits, but these are unlikely to be in a state boilerplate.

If you fail to follow the rules, you may open your personal assets to a lawsuit.

It sucks, but proving it's fake, and then asking the tenant for proof-- that's just a lawsuit waiting to happen, and oh there are lawyers happy to take down a big rich landlord like you!   

We did not want to deal with a law suit for not providing a livable home.

If you fail to follow the rules, you may open your personal assets to a lawsuit.

Depending on your requirements and budget, another option may be a carriage house, garage apartment, or mother-in-law suite. 

Why would any investor want to get involved in a protracted lawsuit that ties up resources and time ? 

For example, the average price of a home, that is equipped with a basement apartment/in-law suite, is approx. $550,000.