Most business-savvy individuals are aware of the primary benefit associated with incorporating their business as a limited liability company (LLC). They know that it shields them from personal legal liability if their company were to be sued. There are also many other pros and cons associated with incorporating your company as an LLC if you’re going to be investing in real estate.
There are many benefits associated with forming a real estate LLC aside from decreasing your personal liability and protecting your assets. One is that this corporate structure isn’t overly regulated. It allows you to enjoy pass-through tax filing as well. This means that you can include your company’s profits and losses on your personal tax income return without having to file a separate business one.
Setting up a real estate LLC does come with some downsides:
- Your LLC doesn’t always offer impenetrable protection for your personal property. There are tactics that creditors can employ that may allow them to penetrate that shield of protection that attracted you to set up a real estate LLC in the first place.
- There are certain incorporation costs and other fees associated with setting up and running a real estate LLC. These go above-and-beyond what you’d have to pay if you were operating in a sole proprietor capacity or using some other type of business formation structure. There’s also an enormous responsibility of owning and running a business instead of handling things a single investor.
- Another downside to forming a real estate LLC is that it doesn’t remain in existence after you’ve passed away or if you file for bankruptcy. It’s dissolved in either one of these situations. This means that all that you’ve worked for many be thrown away if you were to die unexpectedly or come upon hard financial times.
Setting up a real estate LLC here in Hollywood provides you with an avenue to protect yourself from being exposed to legal liability. You relinquish some control over how you can handle things, however, and incur added costs when you form one. A real estate LLC formation attorney can go into more detail about the pros and cons associated with incorporating your Florida business this way and help you decide which option is best for you moving forward.