When do people use LLCs to own property?

On Behalf of | Apr 1, 2021 | Business Law

Forming a real-estate limited liability corporation in Indiana is not free, but you might consider it in certain types of deals. As with all business and legal matters, giving the matter due consideration and getting a personal solution would probably be the best path forward — this article is simply background information.

In any case, LLCs can do more than just own property. They can also be your management company, a fully-owned subsidiary of another company you own and so on. They are versatile — but not perfect.

Why would you use an LLC for buying real estate?

Out of all of the options you have to buy a piece of real estate, forming an LLC is definitely not the simplest approach. So, why would you do it?

An article in the Washington Post outlines a number of reasons why you would want to use an LLC to own property. The advantages include:

  • Personal protection from legal liability for you as an owner
  • Ownership options that are much more flexible than personal property
  • Lack of a personal obligation to pay loans back (this could also be a disadvantage in some situations)

Why would you choose a different form of ownership?

Do you have various alternatives to corporate ownership and private property, depending on your goals. For example, you might want to place your property in trust. It depends on exactly what you want to accomplish with the real estate. There are also other considerations, such as what level of control you want, what level of liability you are willing to accept and so on.

In general, LLCs are not advantageous if you want to use personal residential loans. Since your LLC would be a business, banks would probably be more forthcoming with business and investment loans. Unfortunately, the terms on these corporate instruments are usually not as favorable as the equivalents for individuals.

An LLC is a relatively versatile business formation. It has a variety of applications, advantages and drawbacks. Is it right for you? The answer would depend on your exact situation.