For individuals who own real estate, it is important to consider the best way to structure your ownership.
You may at first hold title to the real estate personally, but that may not be the most advantageous method of ownership. Another option is to create a limited liability company (LLC). An LLC is a type of legal business structure organized under your state’s law.
Here are a few things to think about as you decide whether to form an LLC to hold your real estate:
1. Liability
One of the most significant characteristics of the LLC is the limited liability it provides its members (i.e., owners). LLCs allow you to separate your personal assets from your business assets. This separation means that if real estate owned by your LLC is at risk from litigation or creditors’ claims, your personal assets will not be at risk.
2. Taxes
Another factor you should consider is the tax impact of creating an LLC. Single-member and multimember LLCs that hold real estate can enjoy the benefit of pass-through taxation. However, depending on how many owners your LLC has, whether you have a mortgage and how much (if anything) you owe on it, and the value of the property, you may have significant tax issues to consider.
3. Privacy
Creating an LLC may provide greater opportunities to keep information about what you own private. This can be a helpful asset protection strategy if you could ever be involved in litigation or if any of your properties are exposed to risk.
4. Tailor-made terms of ownership.
Finally, one of the most significant benefits of the LLC is the opportunity to tailor the structure of your business. This means that you can define how you will split profits and losses in the real estate and how decisions will be made.
The LLC provides a host of options for individuals interested in maximizing their protection against personal liability and determining effective tax, ownership, and management plans.
We Can Help
If you are interested in exploring the use of an LLC for your real estate, we can help. Our attorneys are ready to help you assess the best way to create an LLC and structure it in a way that provides the most protection for you and your assets both in life and after your death. Call (949) 333-3702 to schedule a meeting with us today.
