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Gateville Law Firm

Real Estate Investments and LLCs

Posted on in Residential Landlord Evictions

Real Estate Investments and LLCs

Why Landlords Should Consider Setting Up an LLC?

A Limited Liability Company or otherwise known as an “LLC” is the preferred method of incorporation for real estate investors. The purpose of an LLC is for the following purposes:

  • Limited Liability Protection

  • Pass Through Tax Treatment

  • Flexibility of Management Structure

Limited Liability Protection

One of the primary reasons of setting up an LLC is limited liability protection. As a rule, setting up an LLC creates separation from the property owner or real estate investor that set-up the LLC. The business purpose of setting up an LLC is to protect one’s personal assets from liability exposure of rental property. For example, if the LLC cannot pay its’ debts or faces a lawsuit or other liability exposure, then the LLC’s creditors cannot go after the LLC’s owner’s personal assets.

Pass Through Tax Treatment

The LLC Tax Structure is a pass-through entity meaning that for federal income tax purposes, the tax structure is disregarded. Owners of an LLC are called “members” and the members appoint managers that run the day-to-day operations of the LLC. Pass-through means that the tax is “passed through” the LLC to its’ individual members tax returns. The owners are responsible for reporting their profits and losses to the IRS.

Unlike Corporations, LLCs and S Corporations avoid “double taxation” because LLCs do not pay a business tax and a tax when the owners or members of the LLC receive a dividend or distribution. LLCs are preferred by most real estate investors due to the ease of set-up and the limited liability protection it offers.

Flexibility of Management Structure

A key feature of the LLC is its’ flexibility that it offers for a family investing in real estate. In contrast to an S corporation, an LLC may have multiple ownership structures and investment opportunities. A requirement of the S corporation is the S Corporation must only have one class of stock. On the contrary, an LLC is flexible and real estate investors can set-up different classes for its’ investors and one class of membership interest for the managers of the LLC. For example, real estate investors may want to attract investment from family and friends. However, most real estate investors will not want those family and friends to influence how they run their day-to-day operations. Therefore, the investors may have a non-voting share of the LLC while the managers of the LLC maintain membership ownership with voting shares of the LLC.

Yorkville and Kendall County Formation of LLC Attorneys

Sean Robertson and Gateville Law Firm concentrate in setting up LLCs for real estate investors and property owners in the Kendall County area including Yorkville, Oswego, Plano, Newark, Aurora, Plainfield, and Joliet areas. Attorney Robertson may be reached at. Gateville Law Firm assists property owners with the following services:

 

  • Setting Up Limited Liability Companies or otherwise known as “LLCs”

  • Quit Claim Deeds for Transferring Property Ownership into an LLC’s name

  • Asset Protection for Real Estate Investors

  • Estate Planning for Real Estate Investors and Property Owners

  • Series LLCs for Property Ownership and Real Estate Investing

  • Landlord Eviction Services in Kendall County including Plano, Newark, Plainfield, Joliet, Aurora, Oswego, and Yorkville

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