What are LLCs and Trusts - Which is better

Tuesday September 15, 2020

What are LLCs and Trusts - Which is better
What are LLCs and Trusts - Which is better

It is smart to think about using real estate as an investment. Purchasing real estate for this purpose can grow your wealth. When you buy a property, you can buy it under your name or under a legal entity. LLCs and trusts are some types of these entities. Why Purchase Under a Trust or LLC? People choose to purchase investment properties under trusts and LLCs for a variety of reasons, but the primary reasons are liability protection and anonymity. If you find yourself in a lawsuit over your property, having a trust or LLC can allow you to be liable only for some aspects of your property. Plus, it will be harder to identify you as the owner, which may be advantageous if you want to maintain anonymity. Trusts A trust allows you to pass assets and hold title to benefit a certain beneficiary. This option is great for people who are in a co-ownership or for people who want to pass along their property to their heirs after they die (estate planning). It is important to look into the legal fees associated with trusts, as they are constantly changing and you will inevitably have more debts to pay. LLC An LLC is a business entity that is distinct from its owners. It is a “pass-through” tax entity, so business profits and loss pass through to the owners to file in their tax returns. LLC stands for “limited liability company.” This is because if your property is subject to a lawsuit, your are only liable for what the LLC allows. This is attractive to many owners because it makes them liable for less things and they likely won’t have to pay damages out of their personal assets. LLCs also tend to be more anonymous than trusts if you want to hide that you are the owner. You can probably see why business owners tend to gravitate towards this type of entity. Purchasing Under Your Name Although you assume liability risk by purchasing real estate under your name, there are advantages. Be wary of the legal fees that are tacked on to purchasing as an LLC or trust. These fees often amount to more than what liability insurance would. When purchasing under your name, you get to avoid these added expenses. It is also easier to get a mortgage when purchasing under your own name so banks are able to get your personal assets if you show you’re not good for the loan. Further reading: https://www.investopedia.com/articles/investing/121015/real-estate-trust-or-llc-helping-landlords-choose.asp https://www.nolo.com/legal-encyclopedia/real-estate-llcs-real-estate-trusts-other-real-estate-purchasing-options.html Was this article helpful? Check these out: Things to Consider Before Making an Offer on Your Dream Home The Pros & Cons of Buying a New Construction Home Tips for First-Time Home Buyers How to Invest in Real Estate the Right Way To get in touch with one of the top real estate agents in Las Vegas, check out Our Team, or feel free to Contact Us and we will help you find the right fit.

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  • Craig Tann Broker
    huntington & ellis, A Real Estate Agency
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