Creating an LLC for property

[Roosevelt Clairjour]

Hello everyone,

So I am at the beginning stages and I am researching the necessary steps in order to own property. I was wondering what would be the benefits of creating an LLC for owning your properties and how would you be able to obtain the income (profits from sales, rental income, etc.) if you go down that route.

Thank you!

[Mike S.]

Dividend is probably the worst way to get your money out in a real estate LLC.

First of all LLC is a state entity that does not exist for the IRS. An LLC can be taxed as a C-Corp, as an S-Corp, as a partnership or even be totally disregarded.

If you are investing by yourself and without other partner, the more often used structure would be a single member LLC. Unless elected otherwise, it would be a disregarded entity and all the income would flow through your tax return like it does without an LLC. Using an LLC in real estate has usually no tax benefit. It is used for asset protection. And it is not as easy as going online and create a new LLC. You have to understand your State charging order protection if any (some don't have it as sole remedy, other will only provide it for multi members LLC). I would strongly suggest that you educate yourself on the subject as there are many excellent threads on the subject already on this forum.

Also I would encourage that you learn about the negative aspects of using an LLC too (cost, lending limitations and rate, use of a lawyer to represent it in court, ...). When you will understand all the pro and con you will have all the elements to decide if using an LLC is the proper answer to your specific situation.