How an LLC Provides Protection for Your Property
Owning a rental property can involve complex legal, financial and strategic decisions. Of those crucial choices is selecting the appropriate business entity. If you are one of many homeowners investing in a rental property, choosing the right business entity can provide significant advantages in terms of liability protection and tax benefits. Read our quick guide to understand your options.
Understanding Business Entities
When selecting a business entity, individuals may choose one of the following:
- C corporation
- S corporation
- Limited Liability Company
- General and Limited Partnerships
- Limited Liability Partnerships
Each has its advantages and disadvantages, dependent on the case.
Homeowners investing in a rental property may benefit from an LLC, Limited Liability Company. Here’s why:
1. Liability protection
The primary benefit of having an LLC for your rental property is the liability protection it offers.
2. Personal Asset Protection
Your home, savings, and investments are protected from lawsuits or claims related to the property. The only assets within the LLC are at risk if there is a dispute with a tenant or if someone is injured.
3. Limited Liability
Owners of the LLC are not personally liable for the LLC’s debts or liabilities. This is important to note as your personal wealth is shielded from potential legal actions.
What Are the Benefits of an LLC?
Estate Planning Benefits
Incorporating your rental property into an LLC can simplify estate planning and the transfer of assets in these three ways:
- Ease of Transferring Ownership
- Avoiding Probate
- Maintaining Control of Property
Tax Advantages
Here are three tax benefits from an LLC that property owners will see:
1. Pass-through taxation
Income generated by the property is reported on the owner’s personal tax returns, avoiding the double taxation that C corporations will experience.
2. Tax Deduction
Property owners can take advantage of tax deductions for expenses related to the property, for example, repairs and maintenance.
3. Flexible Taxation Options
You may be able to have the LLC taxed as a sole proprietorship, partnership or S corporation.
Professional Management and Privacy
Property owners can appoint a manager or management company to handle day-to-day operations. This is an excellent benefit if you do not live near your property. Additionally, property owners who prefer to keep their privacy may opt to keep their name off of public records related to the property. Please note that this can be done in most states, not all.
Why Work With Kevin L. Miller, PC?
Oklahoma attorney, Kevin L. Miller, PC regularly advises and represents clients on issues involving the formation of an appropriate business entity, the acquisition and sale of a business, real estate property matters, contract review and negotiation and general business and corporate law.
Kevin also advises on and drafts subscription agreements, shareholder agreements, buy/sell agreements as part of the startup process as well as preparing the initial organization minutes and consents.
With Kevin L. Miller, PC, you will experience personalized, professional service in a confidential, welcoming and comfortable environment. Get started on your LLC today with Kevin’s expertise. Give us a call today at (405) 443-5100.