Why You Should Use an LLC for Your Real Estate Investments

Many real estate investors choose to form an LLC in order to protect their investments from potential lawsuits or damages.

Do you want to protect your real estate investments? If so, then an LLC may be the right choice for you. Real estate owned by an LLC may provide added legal protection against any potential lawsuits or damages. This article explains what an LLC is and why it’s beneficial for people who invest in real estate.

What is an LLC?

LLC stands for Limited Liability Company. This type of entity shields its owner from personal responsibility for the debts and obligations incurred by the business itself. In other words, if an LLC incurs any debt or obligation, the LLC may be liable to pay that off, but not necessarily you as the individual who owns this business.

Using an LLC for Real Estate Investments

In some states, you may be required by law to use an LLC for your business if it’s involved in any kind of commercial transaction involving goods and services. Other states do not require an LLC for this kind of transaction, but it may be a good idea to use one anyway.

Many real estate investors choose to form an LLC in order to protect their investments from potential lawsuits or damages. If a landlord has an LLC, then any lawsuit or damages incurred by the property are generally limited to that LLC. The LLC protects both the owner (or owners) and investors in a transaction. This is because, if it’s sued for any damages or debt incurred by one of its properties, then only that property would be liable to pay off such debts instead of you as an individual who owns this business entity.

For example, if a tenant is injured in one of the units, unless they can prove that the landlord was negligent or breaking local building codes, then any lawsuit would be limited to just suing the LLC. This protects an investor’s assets from potential lawsuits.

What does it cost to form an LLC?

It all depends on where you live and what kind of business entity you need (limited liability company). The average is about $200-$300 in most states for registration fees. You’ll also need to pay an annual renewal fee.

How long does it take to form an LLC?

Most states allow you to register an LLC online, so it should take less than 15 minutes. The state will provide a form for your entity and then ask the appropriate questions about the business’s name and activity, where it’ll operate, etc.

You may also need to give names of all members or managers (those who have control) in your LLC and specify any other group or person who has a financial interest in the company.

What if I’ve already bought the real estate in my own name?

In most cases, you’ll need to go through the process of transferring real estate ownership of your deeds and title. Since you own both the LLC and the real estate, you’ll need to transfer ownership from you as an individual (or business) to your LLC. There are many professionals that specialize in this kind of transaction and can provide assistance for a fee if needed.