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LLC for Real Estate Investments

Most entrepreneurs know the value of the LLC. A limited liability company is one of the most common corporate business structures. It is to establish and can be used in a variety of ventures. LLC’s that are focused on investment – designed to hold and move assets are very common.

An LLC is an entity that can legally own assets, take on debt, pay taxes and otherwise financially operate in the same way as an individual can. The LLC (instead of the individual) takes all corporate actions.

The most important feature of the LLC is the separation of liabilities from leadership. An LLC acts, as a barrier between the individuals who run the business and the business itself. This means that when the company takes on debt, leases, contracts, lawsuits, risk, and other liabilities, only the LLC itself owes any payments. The LLC’s creditors can pursue anything that the company owns in order to collect a debt, but they can’t pursue anyone’s personal assets. Of course, this protection only comes with proper structuring and corporate documentation to prevent “piercing the corporate veil.”

An LLC can be invaluable when investing in real estate. Whether you want to flip houses, lease apartments or just rent out a vacation home, a real estate holding LLC may be the vehicle for you.

When you form a real estate LLC, the company buys each property, not you. In quite literal terms, the LLC will own the property. Diving deeper, the company also owns all of the property’s liabilities and debt. If someone gets injured and sues on the property, for example, they cannot touch your personal assets. If the LLC ends up in foreclosure, the bank cannot come after your personal accounts. Your money is entirely separate from the LLC’s liabilities.

If you own a portfolio of properties is common to form a separate LLC for each piece of property for more liability protection. Liability is limited to the specific property, while all the rest of your properties stay insulated.

The key to taking advantage of the protection is proper documentation and formation. This is best handled as a team with your legal counsel, accounting, and financial advisors.

1) If you have multiple members of your LLC, you will need a written operating agreement between parties. This should outline each member’s role in the organization, its leadership structure, how the LLC will divide its net income and how it will divide any financial obligations.

2) File the necessary paperwork with the Secretary of State and designate a Registered Agent. These can include your Articles of Organization, Registration of Fictitious Names and EIN number.

3) Formalize your corporate book and Issue Membership Interest.

Using an LLC is a great tool to separate your professional and personal liabilities. In real estate investing, proper structure can help you can buy and operate real estate investments without risking your personal assets. Contact the attorney team at KLG to see if this is the approach for you. 407-641-5847

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