Any advantage to how rentals are titled?

Question

I am purchasing my first rental house and wondered if anyone can help fill me in to any advantages to titling in my personal name versus buying in my LLC's name.  The LLC is for a construction company I am starting but up until now has been a few new houses only.  I know if I "pay" myself from the LLC, that money is taxed pretty heavy.  If I buy in the company's name is there any advantages when I sell or do 1031 exchanges?  This post just proves how many new ideas are on this site as I never knew about a 1031 but am learning.....  Any help appreciated. :lol:

Bill Exeter · Answer

You should also look at you exit strategy as well.  You should always know what your exit strategies are before you purchase.  Certain types of entities may create complications with certain exit strategies.

For example, partnerships, limited partnerships, multiple member LLCs, etc. all create challenges at the back-end when the multiple investors all want to go separate ways, especially if their intent is to complete a 1031 exchange.

Jeff Takle · Answer

There are a couple of other excellent posts around this question too. Not to deflect you to them, but if you do a "Search" at the top of the screen for LLC vs corporation, you will find a number of good responses.

Also, you are not taxed heavily by taking a salary from an LLC. You are taxed normal income tax only. If you are paid from a corporation you are double taxed -- the company is taxed, and you are also taxed personal income tax. That's the disadvantage to corporations.

The basic reason most people who put properties in an LLC or company do so is to provide liability protection in the event that they (the person) are sued. The concept is to make your large assets owned by someone else so that they cannot be "attached" in a judgment / suit against you. However, I usually advise just to get a really good (and large) umbrella insurance policy on the property instead. It's much cheaper, basically no paperwork, and provides better coverage in almost all instances.