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.
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
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.
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
●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.