Attorney John Mlnarik

We know you love to keep up with every development in the law. And while you can simply follow our blog to learn more about Law and legal resources in many practice areas.

  • Home
    Home This is where you can find all the blog posts throughout the site.
  • Categories
    Categories Displays a list of categories from this blog.
  • Tags
    Tags Displays a list of tags that have been used in the blog.
  • Bloggers
    Bloggers Search for your favorite blogger from this site.

Pros and Cons of Forming an LLC for Real Estate Investments

Posted by on in Real Estate Law
  • Font size: Larger Smaller
  • Hits: 2118
  • 0 Comments
  • Subscribe to this entry
  • Print

Forming a limited liability company (LLC) for real estate investments has been a common practice in Florida for more than 30 years because an LLC can help investors protect their personal assets from any liabilities associated with their real estate investments.

Although some real estate investors may elect to rely solely on liability insurance to protect themselves from a potential lawsuit, there are some risks to this approach. Liability policies generally have exceptions and limits that do not wholly protect investors from litigation; an LLC’s protective power is typically broader and more beneficial.

Here are the advantages of forming an LLC for real estate investments:b2ap3_thumbnail_images-2.jpg 

Pros

Limits personal asset exposure to legal judgments relating to the LLC’s investment properties.

Offers pass-through taxation benefits. Although “S” corporations also offer this benefit, they are subject to other requirements and restrictions that may limit their usefulness to real estate investors.

Foreign ownership and investment in U.S. real estate is allowed through an LLC.

Transferring ownership in real estate holdings can easily be accomplished via gifting of membership interests. This can be done without having to execute and record a new deed, thus allowing property owners to avoid transfer and recording taxes and fees.

LLCs can be managed by an owner or third party manager, while corporations are required to have officers and directors.

Offers flexibility in profit distribution options. LLC owners can determine their own distribution structure, whereas “S” corporations require pro rata cash flow distributions.

Cons

Although there are many advantages, not every real estate investor will want to take on the responsibility of managing a company and may instead elect to protect personal assets by purchasing liability insurance.

In order to maintain personal liability protection, LLCs do require that owners observe the legally required corporate formalities such as maintaining separate bank accounts, maintaining a registered agent and maintaining sufficient company records to keep the LLC in good standing.

Real estate investors considering forming an LLC for their investments should do so prior to purchasing investment property since it is easier to purchase property through the LLC than to transfer it later when you may need your lender to consent to the transaction.

A single-member FL LLC may not offer the same level of liability protection as a corporation.

Rate this blog entry:
8

Comments

  • No comments made yet. Be the first to submit a comment

Leave your comment

Guest Sunday, 24 October 2021

Latest Legal Article

How Do You Know if Your Probate Attorney Is Qualified?
What Should I Ask an Attorney that Handles Probate and Estate Pla...
Continue Reading...

Mailing List

sign up for email updates. We will make sure you are the first to hear Legal news .