I have several rental properties in my name. Should I incorporate or get an L.L.C.? If so, what can I expect to pay to have this done?
—B. Lindsay, New York
In today’s slowing real estate market, I have no doubt that there are a growing number of people who are considering becoming landlords. It is a great way to build wealth, but it’s not to be taken lightly.
Since you own several properties, I applaud you for taking a step back to think about protecting yourself. While there are a number of variables that play into whether a limited liability company (L.L.C.) is the best structure for you, as a general proposition it’s definitely something you should explore.
Owning the properties through an L.L.C. would protect your personal assets and limit liabilities to only those assets held by the L.L.C. You may want to seek counsel as to whether it would be sufficient to have your properties owned by one L.L.C. or if a separate entity should be formed for each.
Setting up an L.L.C. should cost only a few hundred dollars. But I would encourage you to think of this as part of your investment. Seeking professional guidance from a lawyer and an accountant is likely to be money well spent. They should be able to help you take full advantage of the tax benefits that come from being a landlord.
To start thinking about these issues, I suggest taking a look at Tax Planning Secrets for Landlords, which is available free at www.landlordtaxsecrets.com.