Introduction
If you own or plan to own rental properties, someone has probably suggested forming an LLC (Limited Liability Company). But is it worth it? The answer depends on your goals, risk tolerance, and tax situation. Here’s a breakdown to help you decide.

Liability Protection

The main benefit of holding real estate in an LLC is personal liability protection. If a tenant sues over an accident on the property, the LLC is responsible — not you personally. Your home, car, and personal savings are generally shielded from legal claims.

Tax Considerations

LLCs are pass-through entities, meaning income flows directly to your personal tax return — avoiding corporate taxation. However, LLCs can also elect to be taxed as an S-corp or C-corp, which may offer advantages in certain scenarios.

Additionally, some jurisdictions charge annual LLC fees or franchise taxes, so be sure to factor that into your budget.

Administrative Work

Forming and maintaining an LLC involves paperwork: articles of organization, separate bank accounts, and annual filings. You’ll need to sign leases, contracts, and mortgage documents under the LLC name — not your own.

Financing and Insurance

Getting a mortgage under an LLC can be more difficult and usually requires commercial lending, which may come with higher rates. Not all banks will lend to LLCs without a personal guarantee.

Insurance also needs to be updated to reflect the entity structure — don’t forget landlord liability policies and umbrella coverage.

Final Thoughts

LLCs can offer valuable protection and organizational clarity, especially for landlords managing multiple units. But they come with cost, complexity, and trade-offs. Talk to a real estate attorney and tax advisor before making the move.