Protecting Your Real Estate Assets

The first rule is to title all real estate that you own or co-own – other than your personal residence – to one or more limited liability companies (LLCs). This includes land, vacation homes, timeshares, rental and commercial properties. Why is the LLC the ideal entity to own your investment real estate? Because it protects the owner(s) personally from liabilities originating from the property (as would a corporation), and, as importantly, it shelters the property and your interest in the LLC against claims by your personal creditors.

There are several other reasons we prefer an LLC over either a corporation or limited partnership as the entity for investment properties. You avoid double taxation with a limited liability company. Since the limited liability company isn't usually taxed as a corporation, you avoid the corporate income tax. Limited liability company income is usually taxed personally to its members. You also avoid personal liability with a limited liability company -- LLC managers and members are personally protected from the LLC's creditors, even when the LLC members manage the company. Conversely, general partners of a limited partnershiparepersonally liable for partnership debts.

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