Over the past decade, Limited Liability Companies (LLCs) have become the preferred form of company for acquiring real estate in the United States. Despite the benefits that an LLC offers, it is not necessarily the best way to acquire real estate for everyone. For many investors, the cost of forming and maintaining a company in the face of the uncertain possibility of a lawsuit is not worth it.

BENEFITS OF BUYING THROUGH AN LLC

Protects the owner from possible lawsuits related to the property. That is, in the event of a lawsuit, they can only go against that property and not against your other property or personal assets.
It allows to deduct the expenses generated by the property.
It allows owners to avoid double taxation both in income generated by rental and in the revaluation of the property. Therefore, the profits generated will be “paid out” solely by the LLC to and not in the distribution of those profits to the owners.
It avoids or reduces inheritance taxes, therefore, when the owner of the company dies, the legal entity never dies, thus reducing the amount of inheritance tax.
If the LLC is made up of a single member (single-member LLC) it could deduct the interest on the mortgage loan.
LLCs typically pay a lower registration and maintenance fee than other types of corporations.
Unlike other types of corporations, being a non-resident alien can form an LLC.
Great flexibility in the distribution of profits.

SHOULD I OPEN AN LLC FOR EACH PROPERTY?

The greatest protection can be obtained through the formation of an LLC for each property. In this way the investor limits the legal responsibility to each one of the properties. If multiple properties are under a single LLC, the liability of one property could expose the other properties. Conversely, if each LLC owns one property, the maximum liability will be attached to that property only.
However, due to the costs of opening, managing, and maintaining multiple LLCs, it is common for investors to hold multiple properties under a single LLC.

ESTIMATED COSTS OF AN LLC

Approximate opening cost between $400-$700
Annual renewal cost ranges from $200 (Florida) to $400 (Delaware) approximately.
Accountant’s fees for administration and annual tax return (before May 1 while Delaware before June 1) depend on the service and structure requested by each client.

WHAT IS NEEDED TO OPEN AN LLC?

register name
Mailing address in the United States
Names of the shareholders. (Can be wife and husband)
Prepare company charter (job of the accountant)
Prepare operating agreement (accountant’s job)

HOW LONG DOES THE OPENING PROCESS TAKE?

The process takes between 3-5 business days in Florida and 5-7 business days in Delaware.

Florida LLC vs. Delaware
The fundamental difference between one and the other is privacy.

In Florida it is public record
In Delaware, information is private.

I PURCHASED IN A PERSONAL NAME, CAN I TRANSFER IT TO AN LLC?

It is important that you plan for this before making the transaction; however, if you have already purchased in your personal name, even though ownership may be transferred, it is important that you consult with an accountant and/or lawyer to analyze your specific case and determine the possible legal and financial implications. Among them it is important to determine:

If FIRPTA applies (foreign investors)
transfer costs
If it is taken as a sale

LEGAL NOTE: These provisions are complicated and require the experience of a public accountant and/or real estate attorney to assess potential legal and tax implications. At no time should this information be taken as advice.