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Why you may want to consider setting up a real estate LLC

On Behalf of | Mar 11, 2021 | Business Formation & Planning

Most everyone has heard of limited liability companies (LLC). In recent years, these have grown popular as business incorporation structures for companies aiming to minimize their legal liability.

What many don’t realize, though, is how there’s not just one type of LLC from which to choose. One specialized version is a real estate LLC. There are many reasons why you may want to establish one of these if you plan to launch a career as a real estate investor.

How a real estate LLC is similar to other LLCs

Some of the same purposes for setting up LLCs also apply when setting up real estate LLCs because:

  • This business structure isn’t heavily regulated.
  • It affords owners personal liability protection from their companies’ actions.
  • Owners can include company profits or losses on personal income tax returns, a concept known as pass-through tax filing status.

While both LLC and real estate LLC owners enjoy some similar benefits, some factors may make the latter business structure unattractive to investors.

Potential downsides to setting up a real estate LLC

Investors may find themselves less interested in setting up a real estate LLC after learning that:

  • There are additional fees and costs associated with incorporating a business as an LLC instead of running it as a sole proprietorship.
  • Creditors often have a way of working around what you believe is an impenetrable layer of protection from real estate LLCs.
  • Real estate LLCs cease to exist after you file for bankruptcy or die, making it virtually impossible to pass on the business that you’ve built from the ground up to someone else.

Careful pre-planning may allow real estate investors to address the above-referenced impasses before they become issues for them.

Where to find out additional information about real estate LLCs

While virtually anyone can go online and find information about various business structures and how to set them up, verifying their veracity and finding answers to some of your more pressing questions can be challenging. An attorney in Aventura can provide you with reliable information about incorporating your business concept here in Florida.