• Thu. Dec 1st, 2022

Why you should use an LLC for your real estate investments


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Many real estate investors choose to form an LLC in order to protect their investments from lawsuits or potential damage.


Do you want to protect your real estate investments? If so, an LLC may be the right choice for you. Real estate owned by an LLC may offer additional legal protection against possible lawsuits or damages. This article explains what an LLC is and why it is beneficial for people who invest in real estate.

What is an LLC?

LLC means Limited liability company. This type of entity shields its owner from personal liability for debts and obligations incurred by the business itself. In other words, if an LLC incurs a debt or an obligation, the LLC may be required to repay it, but not necessarily you as the owner of that business.

Using an LLC for real estate investments

In some states, the law may require you to use an LLC for your business if it is involved in any type of business transaction involving goods and services. Other states don’t require an LLC for this type of transaction, but it may be a good idea to use one anyway.

Numerous immovable investors choose to form an LLC in order to protect their investments from lawsuits or potential damage. If an owner has an LLC, any lawsuit or damage suffered by the property is generally limited to that LLC. The LLC protects both the owner (or owners) and the investors in a transaction. This is because if he is sued for damages or debts incurred by any of his property, then only that property would be required to repay those debts instead of you as the individual owner of that business entity.

Image by Investment Zen via Flickr, CC BY 2.0, no changes.

For example, if a tenant is injured in one of the units, unless they can prove that the landlord was negligent or violated local building codes, any lawsuit would be limited to suing the LLC. This protects the assets of an investor from possible legal action.

How much does it cost to create an LLC?

It all depends on where you live and what kind of business entity you need (limited liability company). The average is around $ 200 to $ 300 in most states for registration fees. You will also have to pay an annual renewal fee.

How long does it take to form an LLC?

Most states allow you to register an LLC online, so it should take less than 15 minutes. The state will provide a form for your entity and then ask the appropriate questions about the name and activity of the company, where it will operate, etc.

You may also need to give the names of any members or managers (those in control) of your LLC and specify any other group or person with a financial interest in the business.

What happens if I have already purchased the property on my behalf?

In most cases, you will need to go through the process of transfer of real estate of your actions and your title. Since you own both the LLC and the real estate, you will need to transfer ownership from you as an individual (or business) to your LLC. Many professionals specialize in this type of transaction and can provide assistance for a fee if required.

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