Unlimited Liability... Is a Limited Liability Company Beneficial?

Question

As being  new to the RE world I have read a lot about how LLC'S are very beneficial to RE Investors because it protects the individual from being sued and it protects the Identity of the individual who owns the property, and has many tax benefits. However then I read LLC'S are not needed unless you have a lot of properties such as rental homes or a large commercial property that is worth millions. So I need help understanding this subject. Does someone just starting off who may acquire a rental home or two really need to acquire those properties under a LLC or not?

Brandon W. · Answer

@Daniel Chang

I understand what you are saying and it makes sense. It really depends on what type of property I have, what kind of liability is to be expected (like if I have homes with pools) and what does my current insurance cover, and how much assets do I have that need to be protected.

You have given me a lot to think about and I appreciate your time.

Daniel Chang · Answer

Brandon,

An LLC has definite benefits, but has fees and paperwork associated with it.  No one will be able to adequately answer this question for you except yourself.  The biggest downside to not having one is the liability.  If you own a small rental or two, how much liability do you really expect?  Specifically, liability that will not be covered by your insurance.

Chances are, it's small.  But it's not 0.  So is it worth it for the upfront cost and the upkeep of a LLC for that small but not 0 liability?  Furthermore, how much assets do you have that is at risk?  If you have a lot, you would want to shield that.  If you don't have much, then why bother...right?

Do a search on this topic in BP.  There has been many people that have asked what you have.