Mark Roy 11/13/2024
The Importance of Operating as an LLC and/or Trust
If you own rental properties it is a great idea to put those rental properties in a Limited Liability Company. One of the reasons to put your properties in a Limited Liability Company is for the indemnification from liability.
Another reason is in the enforcement of rights – evicting a tenant – you do not get hit with a counterclaim against you personally. Another reason is anything that may happen to your personally would cloud title to your real estate if not owned by a separate entity such as an LLC.
Another possibility is to for a Revocable Trust that is the sole owner of the LLC. This provides a double layer of indemnification and offers the possibility of being anonymous since your trust is the owner of the LLC and trust documents are private documents and are not recorded for the public to view. You just need to make sure your name is not in the name of the Trust. You can then hold title to the properties in the LLC and have the Trust recognize all the income. LLCs are either SINGLE-MEMBER or MULTI-MEMBER. Husbands and wives are treated as SINGLE MEMBER.
The additional advantage of this structure is the flow through taxation. We draft deeds to transfer property as necessary and this is common after an LLC has been formed or after a Trust has been formed i.e. to transfer the properties into the LLC and record the Deeds.