The Advantages of Buying a House with an LLC.
You can tap into a few great advantages when you buy a house with an LLC. These advantages include increased privacy, limited liability, tax benefits and partnership opportunities. Buying a house with an LLC also allows you to keep your business separate from your personal life. Let’s dive into the details of these advantages one by one.
As a business owner, you might find the privacy of the LLC structure appealing when you buy a home with an LLC. Buying a house under an LLC ensures that the LLC’s name, not the owners’ names, appears on public documents and disclosures. In other words, LLCs allow you to replace your name with a corporate name, thereby concealing your identity and other information.
Limited liability means that you, as the owner, will not become personally liable for the company’s debts or liabilities. Therefore, if you have a fear of lawsuits as a business owner or real estate investor, the LLC structure may look very appealing to you. However, limitations exist within the limited liability structure.
For example, living in a home owned by an LLC can “pierce the corporate veil.” This legal term means that the owners, shareholders, or members of a corporation or LLC can become personally liable for corporate damages, as if the LLC structure never existed.
The LLC structure can offer significant tax benefits, particularly because it eliminates double taxation. Double taxation refers to profits taxed at the business level first and then a second time at the personal level. Instead, LLCs enjoy a pass-through tax structure, which means that the LLC pays taxes on profits, but the owner of the LLC does not. However, LLC owners must pay taxes on their allocated share of profits.
Easier To Invest with Partners
The LLC structure makes it easier to invest with friends or business partners – even other investors who don’t know the LLC’s principal owner.
For example, two people can launch an LLC as partners. A second member can simply join a single-member LLC and create a multiple-member LLC.
You can also easily sell LLC shares. The easiest way to handle this involves having an existing partner sell their shares to a new member. Members must distribute 100% of the shares of an LLC.
Note: This does not mean that unrelated persons interested in buying a home together should consider the LLC structure. Without a true business purpose, the structure will not be considered legal.
Keep Business and Personal Lives Separate
Many LLC owners may like the idea that buying property with an LLC allows them to separate their property ownership from their personal lives. However, owners who use the LLC for personal expenses make it easier to pierce the corporate veil and disregard the corporation or LLC’s separate existence should the LLC face a lawsuit. Piercing the corporate veil can become an issue for LLCs of all sizes.
Source: Rocket Mortgage