Form An LLC For Each Real Estate Rental That You Own
|
Listen to the audio
- To listen to this interview snippet, just click the play button above (twice if necessary).
|
In this audio snippet, you'll hear about:
- Highly recommended that you form an LLC for each rental
- It is for liability purposes
Audio Transcript
Travis:
Now what about as in the case of an LLC that is an umbrella LLC that
owns a bunch of real estate property. Wouldn't you want to form an LLC
for each real estate entity that you own?
Yosef:
I strongly recommend to my clients in California that every rental
property that they own should be in a separate LLC. Now again that's
not always the case but typically that's the case.
Travis:
In this scenario it's just for liability protection?
Yosef:
It's for liability protection. Now I also highly advise my clients to
make sure they have enough [inaudible] to cover anything that they have
on each of the properties. But I think having a separate LLC... Now,
the state of California, for example –– I know other states are aware
of this as well –– they impose certain LLC fees. They don't like when
every LLC is created because it actually reduces the amount of people
they can collect from because the fees actually increase exponentially
the more income that you have.
Travis:
No kidding?
Yosef:
No. For example, if you're an LLC in California and you have more than
$250,000 of gross revenues. You will pay a few thousand dollars in
addition to the $800 tax just because you have such gross revenues,
even if you may not have any income at the end of the day.
Travis:
No kidding?
Yosef:
So a lot of people try to avoid that by having multiple LLCs.
Travis:
OK, well that makes sense.
Yosef:
But, again, when I first started my practice a while back, I actually
wasn't entirely sure myself back then why an LLC was really important,
or what the distinguishing advantage of the LLC was in the concepts of
real estate, and more specifically real estate development.
Every
situation is going to be different. But one of the advantages of the
LLC is you can have multiple partners with different amounts of
contributions with different allocations for both income and expenses.
Again
these are very sophisticated concepts. But the idea is there's a lot of
flexibility in LLC. My general recommendation is it's only worth
utilizing that flexibility if you need it.
Travis:
OK.
Yosef:
If you don't need that flexibility; if you're working by yourself,
don't go that route. And let's be honest, it's something that you would
need that flexibility for.
Travis:
Makes sense.
Yosef:
So that's something worth considering.
|