An LLC is an unincorporated business entity. The members
of the LLC enter into an agreement under which each is assigned
certain duties and a share of the profits. All income and
expenses of the LLC are then transferred to the individual
owners. The owners of the LLC are shielded completely, irrespective
of their active or inactive status. The LLC pays no tax of
its own; instead, each owner is taxed as if he was a sole
proprietor of his shares.
LLCs are particularly suited to the real estate business
because real estate businesses are invariably linked to the
individual properties owned. The income, expenses, problems,
and liabilities of the properties vary greatly; hence, businesses
in this field always seek to shield their better properties
from those that are troublesome, especially in the area of
liability. All of the assets of a business can be lost if
the problems in one area result in judgments. So to avoid
placing all of the adverse properties at risk, owners place
each one separately into its own LLC. In that way, both the
owners and the properties can be shielded.
The LLC is by far the most protective and efficient business
form for real estate companies, both residential and commercial.
Each separate property can be owned by its own individual
LLC, thereby shielding not only the owners, but also their
other properties, from cross-liability. Not only this, income
and expenses are, for income tax purposes, passed on to the
owners in the proportions that the owners themselves agree
to.
All owners may have a say in management without adversely
affecting tax treatment or the owners' shield from liability,
and there are no restrictions on the number of owners (2
or more) or on the nationality or business status of the
owners.
Forming an LLC provides detailed information on Forming
an LLC, Forming a Real Estate LLC, Laws on Forming an LLC,
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related information.
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