Entity Formation for Real Estate Investment

Real Estate investors and owners typically do not desire to own real estate in their individual names. (One caveat: joint tenancy or TIC arrangement for avoidance of capital gains). In most cases, investors are advised to use the Limited Liability Company ("LLC") as the holding company for real estate.

The LLC provides the following benefits for real estate investors:

• Limited Liability – the liabilities arising from the properties cannot attach to the personal assets of the investors, unless personal guarantees are signed
• Favorable Pass-Through Tax Treatment
• Ability to limit management to a few Members or Investors
• Ability to raise capital though offering of Units or Interests
• Ability to transfer Interests upon death or disability of Investor
• Ability to structure joint venture agreement or operating agreement between investors to specifically meet the needs of the investors
• For the single investor, the LLC is a non entity for tax purposes- income reported on Schedule E of 1040
• In the multiple investor context, the LLC usually will be taxed under the "Partnership" tax rules- losses and income are pass through to the individual investors personal tax return
• Provides anonymity to the investors
• In the case of multiple properties, each property can be owned by a separate LLC and thereby eliminating any liability risks arising from another property

The above is list is in no way exhaustive.

If you need legal representation in the formation of the real estate LLC, contact Michael J. Anthony, Esq.