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What are the Pros and Cons of Using an LLC for Rental Property?


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Depending on what you know about LLCs, you might not realize the benefits they give, or you might think they do a lot more than they actually do. Here are some of the things to think about when deciding if you want to use a rent LLC.

Pro: Personal Liability Protection

One of the major benefits of a Limited Liability Company is personal liability protection. This means your personal assets generally aren’t at risk if something goes wrong with your rental property.

For example, say someone gets hurt on your rental property, sues you, and wins more than your rental property is worth. If you have an LLC, you’ll probably have to sell the rental property and any other assets inside of your LLC, but you won’t have to put your personal assets towards paying the lawsuit.

There are limits to personal liability, though.

For example, if you violate housing laws, the fines will often apply to you personally as the landlord not just to the LLC. If you take out a loan to buy more rental properties, banks will often ask you to personally guarantee the loan instead of having it solely under your LLC.

Pro: Separate Your Rental Properties

Many people use an LLC to show they’re separating personal and business expenses for tax reasons, but you don’t always need a Limited Liability Company to do that. Getting a separate bank account and using QuickBooks is often enough for tax purposes.

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