Should I Put My Property in an LLC?
By Cody McCaughan, Esq.
Oftentimes people forget to differentiate between rental properties and their own homes. They think that just because their real property for personal use isn’t placed in an LLC that their rental properties shouldn’t be either. But there is a big difference between your home and an investment property. Landlords gain a lot from having their properties placed in an LLC.
What is an LLC?
A limited liability company or LLC is a type of business structure permitted by state statutes. Owners of the LLC are called members, and in Florida, LLCs are allowed a single member. LLCs offer protection for business owners and property owners. They protect personal assets from a lawsuit. Below are the four main benefits of placing rental property into an LLC.
1. Liability Protection
LLCs limit personal liability. Essentially, LLCs separate the owners from their businesses and thus provide protection if there is a lawsuit. If a business faces a lawsuit only the business assets are at risk, not the owner’s personal assets. By placing a rental property in an LLC, the owner separates the investment from their personal assets and protects their home and personal property. The LLC is responsible for any debt or lawsuit, not the owner of the property itself. For example, if you own four investment properties and each is held in its own LLC, and someone gets injured on the property only the LLC of that property is liable. In other words, your other three properties are protected and the claims that arise are limited to the value of that individual property.
2. Taxation
Double taxation occurs when a corporation is taxed and then an owner is taxed again on their income. LLCs offer “pass through” taxation, avoiding this double taxation. LLCs let you pass income made in the LLC to your individual taxes, minimizing taxes on the profits, and ensuring you are not taxed twice.
3. Joint Investments
The main governing document of an LLC is called an operating agreement. This document sets out the rights, ownership, and responsibilities of the members and/or managers of the LLC. If you own investment property with a partner, the operating agreement provides an easy way to allocate income, expenses, and other responsibilities between your partner and yourself, as well as memorialize each partners’ respective ownership interest in the property.
4. Privacy
The LLC will be on the public record instead of your name. This ensures privacy that can allow you to separate business from personal life.
Contact Us
LLCs offer a level of protection that other forms of property ownership do not. Although the benefits are clear, every situation is different, putting a property in an LLC may not be the right decision for you. Contact us at (305) 928-4190 for a no-charge consultation, where we will advise you on the best decision for your property.
