Here's a piece of advice - never own real estate in a corporation. Now there are always exceptions to that rule, but the preferred vehicle for owning real estate is in an LLC.
Single Member LLCs
In particular, if you're a single individual owning real estate you may prefer to have what's called a single member disregarded entity (or LLC) acquire your replacement properties. For tax purposes the LLC doesn't exist, it rolls up to your social security number. But for state law liability protection purposes the LLC acts as a barrier, protecting you from personal liability associated with the property.
What if you own real estate and someone is bitten by a dog on the real estate that you own? Perhaps you'll be sued under the theory of premises liability that you didn't protect the public from stray dogs attacking pedestrians. Or what if there are environmental contaminants found on the property? Perhaps you’d have some exposure to environmental liability. Because of the uncertainties and the predatory creditors that lurk out there, many people are advised to own real estate inside of a liability protected identity. The question is what entity is most appropriate for you? Oftentimes a limited liability company or LLC is the ideal entity.
- 1031 Hotline: If you have questions about owning real estate in an LLC, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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