It is always a good idea to have an asset protection strategy when investing in real estate. Many investors with real estate properties own them personally. This can expose the owner’s personal assets to the liabilities and debts of the property. One method used by some for protection is placing their properties in a Limited Liability Corporation (LLC). There are other available options depending on your circumstances however, investigating the pros and cons of an LLC is worth consideration.
An LLC is a separate and distinct legal business entity. The LLC can get a tax identification number, open bank accounts and do business under its own name. One of the primary reasons given for formation of the LLC is to limit exposure of the principle’s personal assets to the liabilities and debts of the business. Additionally, there may be tax benefits, such as Pass-Through Taxation, depending on your specific situation. There is also the potential to gift ownership of real estate being held by an LLC without recording a new deed.
It is important to note, although there are benefits and protections offered by an LLC, one should be cautious. This is particularly important with regard to real estate that is still under financing. There may be contractual limitations impose by lenders when transferring properties into an LLC. This could include triggers that demand full payment of the loan. Also your particular situation should be carefully evaluated to determine if Liability Insurance or a combination of Insurance and an LLC best suit your needs.
Investing in real estate can be exciting and profitable. However, keep in mind that not all situations are the same and you should seek guidance from legal and tax professionals. There are many avenues available for protecting your assets. The important thing is to have a strategy.
Additional information on forming a Limited Liability Corporation in Nevada can be found at: