What is a Limited Liability Company (LLC)?
LLC stands for Limited Liability Company. It is a business structure that combines the features of a corporation and a partnership. In the United States, certain tax benefits and protections exist for corporations so setting up a Limited Liability Company for your rental property may be advantageous.
The Nophin Blog has details on the pros and cons of having your investment properties in LLCs.
What are some benefits of LLCs?
There are many benefits to forming an LLC, including:
- Protection of your personal assets. LLCs provide limited liability protection to owners. As long as the corporate veil isn't pierced, the owner's personal assets are not at risk if the LLC is sued or incurs debts.
- Flexibility. LLCs have more flexibility compared to corporations while having the tax benefits granted to corporations.
- Pass-through taxation. LLCs are taxed as “pass-through” entities, which means that the LLC’s income is not taxed at the corporate level. Instead, it is taxed at the individual level, which can reduce the amount of taxes you pay.
- Simplicity. LLCs require less paperwork and formalities and are simpler to operate.
- Cost. LLCs are generally less expensive to form and operate than corporations.