Many taxpayers wonder how they should acquire their replacement property - as an individual or as an LLC. In this article, we are going to talk about the benefits of purchasing 1031 exchange property as an individual vs. an LLC.
Purchasing Property as an Individual vs. LLC
An individual that’s doing a 1031 exchange can buy his or her replacement property in their own individual name (which is the most common way to go about a 1031 exchange). If you buy property in your own name, you probably want to have a really comprehensive umbrella insurance policy to protect you.
As you acquire more properties and you become more risk averse, your dream team of advisers may suggest that you compartmentalize the liability by putting each of your replacement assets into a separate disregarded entity (typically an LLC) so that each property is in its own separate silo and the liability is contained in those silos. That way, if there is an accident or a claim brought against the property, it’s the LLC that’s being sued rather than the individual owner or all of the other properties that you have.
That being said, most small investors are probably better off remaining in an individual capacity because it’s often easier to borrow money as an individual rather than an LLC. But when you start to get in the range of owning 4+ properties, it might be time to consider the LLC approach.
1031 Exchange Company
CPEC1031, LLC is a 1031 exchange company based in Minneapolis, MN. Our team of qualified intermediaries have decades of experience facilitating like-kind exchanges across the United States. Let us walk you through the ins and outs of your next 1031 exchange of real estate. We can help prepare all the required documentation in preparation for closing. Contact us today at our downtown Minneapolis office to learn more about the full extent of our services and capabilities.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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