The Biggest Advantage and Disadvantage of an LLC

1. The Biggest Advantage and Disadvantage of an LLC Do you own at least one investment property and are interested in forming an LLC - limited liability company? Many investors choose to go this route because of the asset protection that it provides, but it doesn't mean that this is the best choice for your specific situation. Before you make your choice, you must delve deeper into this subject, weigh the pros and cons, and consult with an expert. To get you started on your journey, this guide is here to shed some light. So, without further ado, here are the biggest advantage and disadvantage of an LLC for your real estate investment: Biggest Advantage of an LLC: Asset Protection Everyone knows that LLCs are a great way for entrepreneurs to protect their assets, but this is especially true for real estate. Say for instance, one of your tenants gets injured on the property. In order to pay for damages, he or she will probably sue you. In this situation, an LLC will protect your personal assets - this is because the personal liability of your property is held in the entity itself. Any additional liability beyond that is the responsibility of the LLC and will not affect any other assets. Alternatively, if the property is listed under your name, you will not be afforded this protection. In other words, your personal assets may be in danger if you are deemed responsible for the injury. Also, it is important to note that, there are specific situations where asset protection isn't fully guaranteed, you will need to consult with a professional to ensure that you are always in compliance with Nevada law.

2. Biggest Disadvantage of an LLC: Fees Of course, the specific amount you will have to pay will be dependent on several factors that include the lawyer that you hire and Nevada state law. Still - no matter the circumstances - you will have to shell out some cash to turn your investment property into an LLC. Furthermore, because you are essentially creating a business, you will have to pay some of the fees associated with this process. Some of them include: ●Set-up costs ●Yearly fees ●Filing separate tax returns, requires the assistance of an accountant The Bottom Line Although there are many advantages to be had by placing your real estate rental property investment under the umbrella of protection provided by an LLC, your final decision should be one made after careful consideration. Consult with a professional who specializes in real estate investing, like the ones at RAM, to ensure that this is the right step for you.