Why Every Real Estate Professional Needs an LLC (and How to Do It Right)

Why Every Real Estate Professional Needs an LLC (and How to Do It Right)

Forming an LLC is more than just a legal formality, it’s an essential foundation for your real estate business. Proper formation, management, and tax classification of your LLC can protect you from liability and optimize your tax outcomes.

LLC Basics

An LLC, or limited liability company, shields your personal assets from business liabilities. When structured correctly, it separates your personal finances from property operations or investments, reducing exposure in the event of lawsuits or creditor claims.

Formation Done Right

To form an LLC properly, file articles of organization with your state, obtain an EIN from the IRS, and draft an operating agreement that governs how the entity operates. Even single-member LLCs benefit from written agreements to demonstrate formality.

Tax Classifications

LLCs are flexible for tax purposes—they can be disregarded entities, partnerships, or elect S-Corp treatment. Choosing the right tax classification depends on income levels, number of owners, and whether you actively participate in management.

Ongoing Maintenance

Keep your LLC in good standing by filing annual reports, maintaining separate bank accounts, documenting member decisions, and avoiding commingling funds. These actions preserve liability protection and support accurate financial records.

What Happens When You Don’t Maintain Your LLC

If you neglect annual filings, fail to maintain separate books, or misuse funds, courts may ‘pierce the corporate veil,’ holding you personally liable for business debts. Additionally, poor recordkeeping can trigger IRS issues or missed deductions.

Your entity structure is the backbone of your investment strategy. Let’s review your LLCs to ensure they’re protecting—not exposing—you.

Disclaimer:

Pursuant to United States Treasury Department Circular No. 230, Regulations Governing Practice before the Internal Revenue Service, and the Statements on Standards for Tax Services issued by the American Institute of Certified Public Accountants, we must advise you that written tax advice contained in this email may not be relied upon to avoid any tax penalties. Should you require binding tax advice that may be relied upon to avoid accuracy-related penalties, you must request that from us and, to the extent we are able to provide such advice, we will provide it in an appropriate written form.