If you own a business that happens to be a limited liability company (LLC), you know the benefits this business entity can offer you as the owner. However, it turns out LLCs are not just beneficial to business owners but also to property owners. Whether you own a single rental home or preside over several investment properties, putting real estate in an LLC may be the safest option for you. Consider four ways this decision can benefit you before you decide if it’s the right move for your properties.
1. You Can Look Forward to Tax Benefits
There are a couple of ways that putting property in an LLC can benefit you at tax time. For instance, with an LLC, you get pass-through taxation. This means any income your property generates is passed through to you–the owner–to claim on your individual return. This means you won’t have to deal with the issue of double taxation. In addition, if you manage the property yourself and make less than $150,000, you can write off up to about $25,000 in losses on your rental home–further offering some protection when it’s time to file taxes. Plus, you can deduct mortgage interest just as you would if you didn’t use the LLC for your property.
2. An LLC Removes Your Liability
One of the main reasons putting a house in an LLC is the safest option is the protection it offers in the event of a lawsuit. If your tenants or anyone who visits your property end up injured, they could file a lawsuit to recover their costs. This means they might expect you to pay for the bills associated with their hospital stay, rehabilitation, lost wages and any damage to their belongings. Not surprisingly, the costs can add up fast, and you might be responsible for them if your home is not in an LLC. That means you could lose your assets if you don’t have the cash to pay.
If you put your home in an LLC, the only assets you would lose are the ones owned by that LLC. This protects your personal assets, such as your own home, vehicles, retirement accounts and any other investments you wish to keep.
3. You’ll Get Financial Benefits When You Sell or Transfer the Property
When you put your property in an LLC, you’ll find you can transfer ownership easier than usual. Doing this within your LLC can help you gift the property without going to the trouble of recording a new deed. You therefore get to avoid the fees and taxes that come with transferring and recording a deed. So if you plan to transfer any of your properties in the near future and want to save some time and money; putting them in your LLC may be a good idea.
4. It’s Easy to Form an LLC with an Attorney’s Help
If you already have an LLC, you know the complexities that can go into forming this type of business entity yourself. That’s where hiring an experienced lawyer comes in. When you have someone on your side who has created countless LLCs for business owners in your area, you can rest assured the process will be smooth for you. All you need on your end are the documents your attorney requests to form the LLC. Once you have this business entity in place, you and your attorney can discuss whether adding your investment properties would be right for your situation.
If you have any questions about whether an LLC would benefit you, or if you’re wondering if you should add your properties to your existing LLC, come to Fisher Stone, P.C. to schedule a free, quick strategy session.