Whether you
own one, or many income properties, owning them personally can be a major
liability. There is an inherent risk of liability with
property ownership. Should an accident occur, you might lose not only the
property itself, but all of your other personal assets (including other
properties, your home, bank accounts, vehicles, stock, etc). Although insurance
can limit your potential exposure, why be exposed at all?
Many real estate investors create a
Limited Liability Company (LLC) to protect their personal assets from possible
litigation associated with their income property. If
the property is held in your personal name, a successful claimant will be able
to attach your personal assets to satisfy the judgment. By contrast, if the
property is held in a California limited liability company, the LLC may be
liable. A successful claimant will be limited to only attach the assets of the
LLC and your personal assets will remain protected.
Although it may be possible to protect multiple
income properties from one another by establishing a separate LLC for each
property, LLCs with the same officers and directors may be considered
fraudulent. It would be most prudent to discuss your options with a qualified
attorney.
A California real estate LLC can also provide
significant tax advantages as well as estate planning benefits.
For more information on these topics you will need to consult with a tax
accountant or tax attorney.
Creating
your limited liability company is fairly straight forward. You will register
your LLC with
the California Secretary of State. There are many attorneys that offer LLC
services.
The
limited liability company (LLC) has become a favorite vehicle for owners of
income-producing real estate seeking to easily and inexpensively establish a
level of personal liability protection from claims from tenants and outsiders.
