Limited Liability

Having real estate owned in the name of the LLC protects you from personal liability especially if something catastrophic happens on the real estate that is in excess of the insurance coverage on the premises.


Multiple Parcels of Real Estate

It is not always clear whether you should keep adding additional real estate to an already existing LLC. Although it may be less expensive and easier administratively and there may be some estate tax advantages to having all real estate held in just one LLC, in certain cases in may be safer to form a new LLC for each new real estate purchased. This would protect each property from liability that could occur on another parcel of real estate. This would especially be the case of ultra-hazardous real estate or if a catastrophic event were to occur on one piece of real estate.


Watch Transfer Taxes In Certain States When Transferring Real Estate to the LLC

In certain states and cities, such as Pennsylvania and Philadelphia, a transfer tax is imposed on this change in title. This can result in a very large unforeseen tax cost. This is why it is often better to form the LLC first and have it acquire the real estate.


Watch Passive Loss Limitation Rules

Whether you are subject to the passive loss limitation rules depends on many complicated factors (material participation, AGI less than $150,000, involvement as a real estate broker, etc.) that need to be explored to maximize tax planning.


Disregarded Entity Status Allows for Simpler Tax Reporting

If you own the LLC 100% than it is treated as a disregarded entity for tax purposes. This allows you to report the LLC income or losses on your Form 1040, Schedule E while the LLC need not file separate returns, at least at the federal level. Some states require some entity tax returns to be filed.