REAL ESTATE INVESTING WITH A PROPERLY STRUCTURED LLC AND OPERATING AGREEMENT IN 2024

When you are ready to move forward with your next real estate investment, you may want to consider having our firm CREATE a new or REVIEW your current Limited Liability Company (LLC) and Operating Agreement to make sure you limit your personal assets from liability in the event of litigation. A properly structured Real Estate LLC with an operating agreement allows the owner to buy, sell, or rent their property without the worry of their personal assets being put into jeopardy. LLCs offer strong benefits aside from just liability protection, such as pass-through taxation, and flexibility in business structure. To further protect all your assets, it may be advised to keep a single investment in it’s own Real Estate LLC entity.

 

 

 

A Limited Liability Company (LLC) is known as a ‘pass through entity’ because they are exempt from paying corporate taxes. Meaning all proceeds of the company are used to pay debts and are then distributed accordingly to its members to pay individual taxes on. Members can then write off the LLC in their taxes as a profit or loss in their personal income. Additionally, if your LLC is used for managing rental properties, you may be eligible for an additional personal income tax deduction. When deciding on the distribution of the companies proceeds, LLCs offer a flexible business structure to apportion appropriately.

To properly structure an LLC, investors use what is known as an Operating Agreement.

Operating Agreements allow the company to set, for each member, a framework to accommodate for each other and to distribute ownership. Setting up operating agreements is only required depending on the state in which the entity has been formed. These can be referenced when needing to resolve problems or disputes that could occur within the company. Unlike Operating Agreements, Articles of Organization must be filed to legally establish the entity with the state. Together they are the framework for your Real Estate LLC.

While purchasing real estate without the protective vail of a limited liability company is legally possible it is deemed unwise. Investors might find that the strategic choice of real estate management through an LLC is a crucial step into the real estate market. With the major advantage of highly mitigating financial risk, tax advantages and asset protection investors can leverage their LLC to venture through the unprecedented world of real estate investing.