![]() ![]() ![]() There are also disadvantages to consider if you’ve recently asked yourself, “Should I put my rental property in an LLC?” 1. Disadvantages of an LLC for a rental property When you operate under an LLC, you and any relevant members have legal protection against any possible company wrongdoing.įor example, if your property requires any repairs, but the contractors go unpaid and eventually sue, your personal assets will be protected. If you choose to operate without a formal business structure, you risk becoming personally liable for any business matters. Using the LLC structure helps avoid corporate double taxation on business profit and personal income. Shareholders cannot be distributed any profit as income until entity-level taxes are paid. United States tax laws require corporate income tax at the entity level and the shareholder level. Likewise, when you file your tax return, your personal tax returns and business returns will be calculated and adjusted separately. Separating your rental property into its own LLC will require a separate bank account and credit cards, allowing you to organize your finances better and avoid muddling your personal statements with your business expenses. When you invest in a rental property, there will be many expenses to take on, like closing costs, tenant screening charges, and maintenance incidentals. Keeping your business and personal expenses separate ![]() Much like starting an LLC for any other company, there are financial and legal benefits to running your rental property under an LLC. Likewise, there can be unlimited owners, also known as members. They’re popular amongst entrepreneurs since they limit personal liability for the company’s actions, provide tax advantages, and are easier to manage than a corporation. A limited liability company, or an LLC for short, is a legal structure you create when starting a new business to provide liability protection and avoid corporate double taxation. ![]()
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