It has some benefits to protect your personal assets.

My concern is does that break down and defeat my asset protection structure in the first place, as I may be acting as a single entity in terms of the bank loan?

But you have to treat the selling process just as any other agent would; Prepare a fact sheet, List on MLS, Protect buying agent, Make yourself available for showings (or a lock box), Keep a log of contacts, etc.I did this nearly 10 years ago and did not find it a problem.

Are there tax benefits to an LLC, or is it just for the liability protection?

Soft surfaces are fine for good tenants but my philosophy has always been to over-protect everything if it's going to be a rental.  

For additional protection, I would like to have it under an LLC.

This is my first experience with new construction and i'm not sure how we should properly protect our equity from lawsuits in this situation.

If we flip, it's a non-issue.And, sounds like an LLC (for REI purposes) will only serve as a legal protection entity against my wife and I; there are no taxable benefits we can take advantage of.

Good luck on getting them to admit and pay for their mistakes.They will just come back and say it's the owners responsibility to research and accept the tenant and risk or not.That is why you put in hurdles as an owner for protection depending on who the tenant is. 

At what point should I form an LLC or something similar to help protect my family and my future investments?