How does an LLC benefit me?


LLC Properties – what are they and how can they benefit you?

According to the U.S. Small Business Administration (SBA), “A limited liability company is a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.” So what does this mean in layman’s terms about LLC properties and how does it help you?

"The tenant can still come after your LLC"

Well, many landlords chose to transfer their investment or rental properties to an LLC because of the reduction of personal liability. Let’s say for example one of your tenants trips on a loose walkway brick and breaks her leg.  Certainly, she will seek monetary compensation for her loss, and may even sue you in court. However, if you are operating as an LLC, you’re personally protected. The tenant can still come after your LLC, and only your LLC, but she can’t come after your personal assets.

Placing property in an LLC can also help with succession planning.  This is true whether the property is an investment or a second home.  This is because the LLC’s membership interest can slowly be transferred over time to your loved ones, which streamlines the transfer process without the need for Will formalities or Court intervention.

"this can help with double taxing issues"

Creating an LLC may also have tax advantages. However, it is encouraged that you speak to your qualified tax advisor so that she can properly advise you and apply it to your own circumstances. In short, because all profits and losses are passed along to the members of the LLC and must be reported on personal tax returns, this can help with double taxing issues.

"Some lenders could call your loan and force you to refinance if they learn of the LLC transfer"

It should be noted that there are also disadvantages to putting property in an LLC.  Namely, there is the cost to establish the LLC, as well as annual costs payable to the Commonwealth to continue the LLC in good standing.  Also, many financial institutions do not like lending to companies.  Some lenders could call your loan and force you to refinance if they learn of the LLC transfer.

The process of establishing an LLC is pretty straightforward.  At 20WestLegal we can help ensure that the proper documents are registered with the state, and keep up with your annual reporting, all at a reasonable cost.  If you are considering transferring your property to a limited liability corporation, contact us at your convenience and we can help you establish you LLC properties in good standing.