Perhaps the most common question I receive from BiggerPockets members is, “Should I set up an LLC for my real estate business?”
It’s a good question because I’m sure you’ve heard the horror stories of landlords getting sued by tenants and losing everything. You didn’t spend years learning about real estate, growing your portfolio, and figuring out how to be an effective landlord only to lose it all to some deadbeat looking to game the legal system.
However, LLCs are also highly misunderstood in the real estate space because they are just so darn complicated. What works for one person may not work for you, and what works for you might not work for me. While I could give you the simple answer of “talk to an attorney,” I want to dive a little deeper.
Of course, I am neither an attorney nor a CPA, so please take what I’m saying as my own personal opinion and get a qualified person to help you out with these legal discussions.
What is an LLC?
First, let’s talk about what an LLC is and what it isn’t. An LLC is NOT a get-out-of-jail-free card. You can be sued with an LLC, and you can lose everything. An LLC is not designed to prevent you from ever being sued. An LLC is designed to help you manage and contain the fallout from that lawsuit.
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