Many owners of income-producing real estate like to operate under an LLC because their personal assets, such as stock, bank accounts, vehicles and their other LLCs, aren't at risk if an accident or other incident occurs on premises or if undesirable flaws in it suddenly surface.

Generally, all that is at stake in a lawsuit against an LLC is each member's investment in that LLC business. Often, owners of multiple properties split them up into separate LLCs to segregate their problem assets from their premium assets. Of course, LLC owners -- or "members" as they're called -- are not exempt from personal actions of fraud or negligence. But that doesn't keep some fly-by-night builders and other bad-faith operators from hiding behind them, unfortunately.

On the tax side, an LLC benefits greatly from its classification as a "pass-through" company, which means its income is passed through to its owners and claimed on those owners' individual returns. Hence, it is subject only to capital gains on the ownership shares of the member, and not to corporate capital gains taxes, so there's no double taxation. LLCs with just one owner-member, however, are taxed as a sole proprietorship. LLCs are certainly not headache-free. They can be relatively expensive and complex to set up and may be dissolved if a member dies or withdraws. Some states have unique laws that govern LLCs.

But if you're getting into serious real estate investment, the LLC provides you many protections.

For a consultation please contact:

Robert Petrich, Commercial Real Estate Specialist
Cell Phone: 708.917.3333
Fax: 708.425.2699
E-Mail:bob@brookshireinvestments.com