http://www.REIClub.com - Real Estate LLC Allows For Financial and Tax Advantages. Here Are The Pros and Cons of Putting Your Real Estate Into An LLC...
Hi, this is Frank Chen with REIClub.com, the only site you need as a real estate investor. Today I've got quick video on the pros and cons of protecting your real estate business using LLC's.
Entity Selection - looking for... - Protect your assets - Save you taxes - Help audit-proof your IRS returns
Pros of Real Estate LLC
- Limit personal liability
- 1040 Flow Through Tax Benefit - avoid paying both corporate and personal taxes - double taxation
- No limitation on Number of Owners - some entities have a 75 owners or less
- Characteristics of Corporation and Partnership - Corporation - dividing line between business and owners - Partnership - allows more flexibility between the members.
- Protect multiple real estate investments under 1 LLC - if setup correctly - equity stripping - use another LLC to create liens on properties, no equity
- Cheaper than incorporating
- Much less paperwork than a corporation
- Deduct home study courses, seminars, travel, and other expenses
- Avoid Transfer Tax - Transferring LLC's = no tax
Cons of Real Estate LLC
- must have own bank account
- might have to pay accountant more
- harder to qualify for loans for properties under an LLC (I've been told)
- evictions must go through a lawyer in some states
- self-employment tax
- franchise tax for getting LLC benefits - vary by state
- llc setup strategy - file articles of organization (public document)
For some states you are able to - use "nominee member" or "organizer" - friend, co-worker, partner - after formation, nominee resign - you and other (real) members are elected - won't appear on the public records
***Consult an attorney to verify
- Some Investors Suggest NOT creating single member LLC's, why? - entity veil pierced - exposing personal assets - no charging order protection (in most states) - higher IRS audit risk
- Avoid basic setup - consult an asset protection attorney - operating agreement
Real Estate Limited Liability Companies have many tax and legal advantages, but is incredibly important that you consult with your local real estate attorney to make sure that an LLC is a good fit for you and the type of real estate investing business you are running.
Again, this is Frank Chen with REIClub.com. Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you'll be automatically notified when we upload more quick video tips for you. Take care and good investing.