What is a LLC?

04 Jun What is a LLC?

When you hear about businesses, you normally hear about a corporation (which protects the individual members) or a partnership (which provides certain tax advantages).

But an LLC (a Limited Liability Company) is the best of both worlds and is great for real estate investing.

An LLC can provide legal protection against personal lawsuits. Although the exact details vary from one state to another, the general principle remains the same. Why is this important for real estate investors?

When you have any sort of an asset in your name, you are responsible for what happens to that asset and for any injuries caused by it. For example, even if another driver uses your car, if he gets into an accident many states allow the victim to come after YOU because the car is registered in your name. The same is true in many areas when dealing with land and houses.

When you list your land for sale, you want to protect your investment and you want to protect yourself. For that reason, not only is it a good idea to get some insurance from a broker specializing in “fix and flip” houses, but you should also buy the property through an LLC. That way, if anyone gets hurt on your property (of inside the house on it) your personal wealth will be protected, only the LLC can be sued.

These days, there are people who specialize in nuisance lawsuits and in playing the victim. An LLC can help you to protect yourself and the results of your hard work.