Placing Rental Properties in an LLC

Many people consider how to best protect their assets. If you are considering purchasing rental properties or already have rental properties, you may be curious if creating a legal entity known as a Limited Liability Company (LLC) could insulate your assets and protect them. There are pros and cons to placing your rental property in an LLC, and the answer truly depends on your particular facts and circumstances.

Benefits of Placing Rental Property in an LLC

There are some very real advantages to placing a rental property in an LLC. Again, much of this will depend on your unique facts and circumstances, however, some of the benefits of placing a rental property in an LLC are listed below:

  • Asset Protection. Many property owners consider placing their rental properties into an LLC strictly for the asset protection that it provides. Property owners typically do not want to have their personal assets at risk for any lawsuits, and placing rental property in an LLC does allow for that type of protection.
  • Tax Benefits. An LLC is taxed legally as a “pass-through” entity. This means that while you are given asset protection, you are still allowed to obtain any of the income or capital gains that may occur relating to the rental property.
  • Protection of Privacy. Legally, a person must put their name on the deed to a property, which is public knowledge. However, if a person makes the decision to form an LLC, they can legally create a holding company that allows for more protection of privacy.

Disadvantages of Placing Rental Property in an LLC

While there are several benefits to the creation of an LLC for a rental property in the state of Florida, there are some disadvantages as well.

  • LLCs cost money to create, and the amount will depend on the level of tax preparation you will need.
  • Possibility to Pierce the Corporate Veil. While every state has different laws, many states will look to decisions in other states regarding how to apply different bankruptcy regulations and laws. In 2003, one bankruptcy court in Colorado made the determination that while an LLC purchased a property, the owner of the LLC actually still owned the property, which could be used for bankruptcy calculations. The laws regarding bankruptcy are ever-evolving and it is important to visit with an experienced attorney to ensure your legal rights are protected.

Let Us Help You Today

You should always visit with an experienced attorney regarding placing rental property in an LLC. All of the operating agreements, business practices, and legal documents of a business can work together to provide different levels of asset protection. Visiting with an attorney can ensure that your assets are protected in the best way for your individual circumstance. At the law offices of Julianne Frank, Esq., we can help you find ways to protect your assets if you have property or rental properties. Call a skilled Jupiter bankruptcy lawyer at (561) 220-2528 for a free consultation today.


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