An LLC or Limited Liability Company is a relatively new system of business organization that is growing fast in popularity. It is composed of several members or owners and a managing member who enjoys the benefits of a limited liability and is usually the one who manages the business. However, if an LLC only has a single owner, it will be considered as a single proprietorship.
In the world of real estate, a rental business is considered as the best venture because the income derived from the rental property is not once, but is continuous until the existence of the property. On the other hand, because of the increase of legal problems faced by landlords like molds, pests and the more serious such as physical injury because of structure defects, sometimes the losses are more than the income derived from the rental business. In several instances, the losses have to be taken from the personal property of the landlord. This will not happen if your rental property is covered by an LLC.
The LLC protects your personal property from being attached to your rental property liabilities. Its protection is the same as that of a corporation, which protects the personal assets of each shareholder from litigation by creditors of the company itself. This means that if someone will sue the corporation and its assets are not enough to cover the obligation, then the creditor will have to be content with what is available because he or she cannot chase after the individual assets of the shareholders.
The law does not extend the same immunity to personal property to a sole proprietorship. If the business assets are insufficient, the personal property of the owner will serve to cover the insufficient amount until the business obligations are fully paid. This includes bank accounts, car, home and other business of the owner.
With an LLC to cover your rental business, you get income as a single proprietor because the profits are yours alone and you are protected in the same way as to that of a corporation since your personal assets could not be attached for claims of payment.
In a sole proprietorship, you simply have to register your rental business and the attorney’s fees are in minimum. You will solely enjoy the profit and you can manage the business the way you want it to be done. On the other hand, in a corporation, you will have to deal with other part owners in handling the matters of the business.
Compared to a corporation, an LLC enables you to maximize your profits. The income from a corporation is taxed almost twice. First from its corporate and tax and then from the income you declare. An LLC corporation is not separately or individually taxed from the income derived.
Your rental property business will benefit much from an LLC. It would appear that only a foolish individual would not choose to have his or her rental business covered by the Limited Liability Company.
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