Tax Benefits of Using an LLC in Real Estate Transactions

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Real estate transactions are often complicated when attempting to avoid taxation, and using a limited liability company could assist the owner in acquiring benefits for taxes. It is important to ensure the LLC and all other considerations are fully understood before progressing through these plans, and a lawyer is of great help to avoid violations.

The LLC has been increasingly more important for business owners, estate owners and persons with many assets. Through forms and processes that may be utilized with an LLC, it is possible to acquire tax benefits when real estate has been funneled through the company. While these business entities are relatively new as having been first established in 1977, they have become highly useful for a variety of reasons and provide several benefits to the owner or management of a company. By pushing various assets through the LLC, the owner is given the opportunity to take advantage of the benefits.

Benefits of an LLC extend beyond just taxes, and the owner of the company may protect his or her personal assets through these companies. However, it is important that he or she treat the LLC as a real company to keep from liability issues arising. The LLC must have all necessary processes completed and the other transactions above reproach. There are various forms that must be filed and forwarded to officials, and the Secretary of State must be contacted to ensure the entity is valid. It is often crucial to hire a lawyer to keep other violations from occurring and so that the LLC is legal and legitimate.

Shielding Assets

An LLC protects the owner of the company by shielding his or her assets from litigation in most circumstances. When real estate is owned and then funneled through the LLC so that the tax and other benefits are taken advantage of, the owner of the company is able to protect his or her real estate holdings and interactions better than if he or she were to own the assets without the company. By protecting himself or herself in this manner, it is possible to ensure the real estate is not part of any lawsuit where compensation is provided to the opposing party.

Liability is reduced through use of an LLC. By protecting the assets and personal income of the owner of the company, he or she is able to ensure lawsuits are reduced or eliminated entirely. However, he or she must ensure the LLC has articles and documentation as any other LLC with any processes followed as per necessary in the state or through the country. Sometimes it is helpful to purchase additional insurance coverage for real estate even if it is owned through the LLC. This may protect the investment or if it is used for rental or leasing opportunities.

The LLC Explained

Tax benefits are acquired through the use of an LLC when it has been organized and created through a single person or as a form of company. However, when it is a partnership or a certain type of corporation, these benefits may disappear. When purchasing the real estate through an LLC, the individual no longer owns the buildings and structures. Then, it is important to ensure the company is valid and has no difficulties remaining an LLC. The structure could provide further complications if the owner is not attempting to ensure the LLC is a valid and legitimate business entity.

Often, an LLC is preferred over liability insurance due to the greater degree of keeping liability and litigation at bay. However, the complications in creating and maintaining a business are often too much for many that want to purchase real estate. However, when these are not an issue for the individual, he or she may start an LLC and buy several types of real estate that provide a greater benefit and lower taxation problems.

Utilizing Tax Benefits

When creating the LLC, it is important to ensure the tax options are taken to reflect the most benefits. When this is accomplished, it is possible to pursue these advantages while keeping the LLC up to date with changes and documentation. Then, it is important to hire a lawyer to ensure business transactions are valid, legal, legitimate and in line with company practices. Through legal representation it may be possible both protect the rights of the owner and the company. This may ensure that the real estate is in secure hands through the use of an LLC.


Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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