Most homeowners are happy enough with holding the deed on their residence and rarely own a second property. In hot housing markets like Florida, many investors turn to owning multiple properties as a way of guaranteeing value for the future.
Owning a property always comes with risks, and they get bigger and more complicated with each new transaction. Many people with long-term housing investment plans choose to protect themselves from many of these risks by forming a limited-liability corporation, or LLC, to legally own their investment properties.
An LLC formation for a real estate business offers greater protections for investors than a partnership or a simple liability insurance policy. If investors or owners are hit with a lawsuit that insurance does not cover, they may find themselves facing debt or bankruptcy over the consequences.
There are also possible financial advantages to a real estate LLC. The possibility of taxing income related to real estate at a personal rate instead of a corporate rate, known as pass-through income taxation, is an attractive option if there is a high corporate tax rate.
Some unusual types of real estate holdings, like foreign ownership or co-management, are also easier with a real estate LLC. There are no rigid structures regarding how people participate in and manage LLCs for real estate businesses, and the profit structure may also be decided by the owners.
An attorney is always helpful in establishing a real estate LLC, from advising on the writing of bylaws and articles of incorporation to filing the proper documents with the Florida state and county authorities.
