The LLC offers asset protection, making it a favorite for real estate investments. The LLC combines liability protection with positive corporate tax treatment. Generally, real estate ownership creates the potential for tenant and guest injury liability, leases, contracts, environmental laws, mortgages, and other laws; however, LLCs are advantageous when used to own assets that generate passive income. Website design By BotEap.comTaxes and LLC
When an LLC is structured correctly, it can be classified as a partnership for federal income tax purposes. You can assign tax items, including income, gains, losses, deductions, and credits to their owners in accordance with your operating agreement. Website design By BotEap.comLLCs that are taxed as a partnership or limited partnerships do not have a tax advantage. The main advantage of the LLC compared to a limited partnership is the limited liability protection that is provided to all owners and managers of the LLC. Limited partnerships are mandated to have one or more general partners, who are personally liable for the debts and obligations of the partnership. However, as described below in Family Limited Partnerships, general partners can be a corporation, LLC, Trust, or other business entity that provides protection to older family owners by not having to become a general partner. The LLC offers asset protection to its owners regardless of their involvement in the management and control of the business affairs of the company. Website design By BotEap.comLLCs are extremely flexible and can be used in estate planning. Most of an LLC can be owned by children who are not owner-managers, while the parents manage the business. In the operating contract, non-managerial owners become managers in the event of parental disability or death. Without traditionally transferring assets, wealth taxes are eliminated and the duration of LLCs can be perpetual.