In the past most financing for real estate investments provided the buyers sign the application, obtain an approval and take ownership in the buyer’s own name. Over time, some lenders relaxed this requirement and provided that real estate could in fact be purchased via a legal Trust or the property transferred from the individual into a trust. Another legal entity also provides such benefits- a limited liability company, or LLC. An LLC is a legal entity that has the benefits of asset protection offered by a corporation but taxes are passed through the LLC and not taxed twice as would happen with a typical corporatiShould You Form an LLC?on. You’ll need a bit of legal help setting up an LLC but many investors say it’s more than worth the effort. 

When owners of an LLC buy investment real estate the property’s owner is listed as the LLC and not the owners or officers of the LLC. This means individual real estate holdings are shielded from the general public. If your LLC invests in an apartment building the sole owner is the LLC, your name and names of those who own part of the LLC are hidden, just like a trust can do. Your individual assets are also hidden because of this structure. In such an instance where you’re on the receiving end of a lawsuit involving one of the properties owned by your LLC the only asset that can be affected is the subject property. Your personal property will be protected.

Tenants pay rent to the LLC and not directly to the owners. Property taxes, insurance and maintenance costs are also paid through the LLC. You can also list your heirs as members of an LLC and you can pass the properties directly to the heirs without having them pay inheritance taxes when you die. Note, this is indeed a legal entity and unless you’re an attorney you’ll need some legal assistance as well as making sure following LLC guidelines for the state of Illinois.  But if you’re a real estate investor and currently buy, sell and hold real estate investments personally, you might want to explore the advantages and protections provided by a limited liability company.