Wednesday, June 29, 2016

Benefits of an LLC For Rental Property Owners

Rental property owners are entrepreneurs. And as entrepreneurs, their primary goal is to maximize profit. One of the most basic steps in maximizing profit is to minimize costs and other liabilities. Recently, the up and coming trend of protecting one's personal assets from the liabilities of a rental business is to set up an LLC over the rental properties. With this LLC, the rental property owner's personal property, like home, car and other assets, are protected from the unpredictable demands of owning rental property. There are also other benefits of an LLC for rental property owners.

Personal property protection

First of, what is an LLC? LLC stands for Limited Liability Company. Without the LLC, business owners are liable for damages and other losses from their business even with their own personal assets.

To illustrate, a sole-proprietor will have to pay for anything and everything that deals with his business out of his own pockets. He can never interpose that his business is bankrupt when he still maintains a personal bank account, his own car and his own home. His personal assets will have to answer for the deficiency. Corporate shareholders do not have this problem because they are protected by the law on corporations that shareholders are only liable for losses out of their corporate shares, hence, their personal property is protected and remains untouched by any corporate liability. The downside of forming a corporation though is that the process itself is meticulous and profits will have to be shared with a handful of shareholders.

LLC combines the ease of being a sole-proprietor with the potential of earning huge profits all by yourself and the protection to personal assets that corporations offer. Personal property protection is the most basic and primary of the benefits of an LLC for rental property owners.

Tax advantages

Another of the benefits of an LLC for rental property owners is the tax advantages. Has even better tax treatment than when in a corporation. A corporate shareholder in essence will have to pay taxes twice. First, when the corporation itself pays its taxes, and second when the shareholder has to pay his own tax from the income derived from the corporation. An LLC is not taxed as a separate entity. The property owner will only have to pay his taxes once, upon his receipt of the income from the rental property. Also, the net loss in the LLC can be declared as a personal deduction for the property owner!

Be a professional by name

Real estate laws require one to spend a certain number of hours in real estate activities to be called as professionals in the real estate industry. But being in an LLC, these requirements are cut in as much as half!

An LLC may be obtained for separate properties

Another of the great benefits of an LLC for rental property owners is that a different or separate LLC may be obtained for each and every property. Why is this beneficial? Because when an investment is sued covered by an LLC, all the properties belonging to that LLC will stand liable for the suit. Covering separate properties with separate LLCs will only make the specific property or investment liable for the claim it is sued for.

These are only the basic benefits of an LLC for rental property owners. And these are already enough to convince any serious business-minded property owner, what would a more detailed study of the benefits do? Start protecting your own personal property and increasing your profits all in the same time. Get an LLC now!

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