Traditional LLC for Real Estate Investors
The minimum level of protection required for any real estate investor is forming an LLC
Limited Liability Companies (LLCs) are a legal structure that legally separates you from your business. When you operate through an LLC, people will only be able to sue the business structure instead of your person.
Ideally, your LLC stands in for you. A traditional LLC structure handles everything that could incur legal liability (i.e. what people can sue you for). This versatile structure may be used alone to shield a single asset, and can also serve as a shell company in conjunction with a Series LLC.
PRO: Personal Security Guaranteed
The LLC is the legal owner of your property and assets. If something goes wrong with your business or personal life they cannot get to your money.
PRO: Simple, simple, simple
Texas LLCs are easy to manage. All you have to do yearly is comply with the registered agent requirement and file a “No Tax Due” franchise form online (which takes about five minutes).
PRO: Surprisingly Inexpensive
Texas LLCs have a one-time cost and no annual fees.
CON: All Your Eggs in One Basket
If the LLC owns more than one asset, a lawsuit involving one asset exposes all of the assets of the LLC.
CON: Expensive Tax Preparation
You can hold one asset in the LLC, but it is not ideal because each LLC will be required to file an annual tax return, pay filing fees and pay a registered agent fee.
CON: Not a Scalable Solution
Each LLC requires one-time fees as well as yearly registered agent fees and tax filings. The series LLC is a better option because after the filing you can create as many “LLCs” as you want with no additional costs whatsoever.
Royal Legal Solutions Can Help Real Estate Investors Find the Best Entity for Them
Traditional LLC Structure for Real Estate Investors
Limited Liability Companies (LLC) are a legal structure that legally separates you from your business. When you operate through an LLC, people will only be able to sue the business structure instead of your person.
A traditional LLC structure handles everything that could incur legal liability (i.e. what people can sue you for), which includes all of the operations (e.g. signing contracts). It is intentionally designed to be what people sue. Because it owns nothing, the plaintiff will receive nothing.
How the Traditional LLC Should and Should NOT be used for Real Estate Investors
The traditional LLC is great if you only plan on having one asset or if you are holding a single asset on behalf of a partnership. However, we generally advise investors with multiple assets to go with the Series LLC instead, as it offers greater protection. Your personal situation will influence which entity is best for you. Our experts at Royal Legal Solutions are trained to identify the personal factors that will influence your asset protection plan and craft your legal strategy accordingly.
Why Set up a Texas Traditional LLC for Real Estate Investors Instead of a Nevada, Wyoming Or Delaware LLC?
No Yearly Maintenance
Most states will require minutes, meetings and other formalities to ensure your LLC is in good standing. If you neglect even one area, the whole protection fails. In Texas, you don’t have any yearly requirements besides a “No Tax Due” franchise tax filing, which can be completed in five minutes online.
No State Taxes: Texas does not have income tax for individuals or for companies.
Texas has notoriously strong company protection laws. Even if you make errors that would pierce the corporate veil (e.g. you made errors in your accounting records), Texas law will allow you to fix them and still be protected.
Cost effective: Texas does not have a yearly fee like the other states.
The Series LLC Beats the Traditional LLC for Real Estate Investors
The traditional LLC is great if you only plan on having one asset or if you are holding a single asset on behalf of a partnership. For every other scenario, the Series LLC is better since it provides the same protection as holding assets in individual LLCs; offers scalability at no additional costs; and streamlines the tax preparation and company filings as if it were a single company.
Learn about our popular asset protection products
ASSIGNMENT OF INTEREST
An Assignment of Interest is the legal means for transferring the ownership of an LLC or other Company from one entity to another.
Our property transfer service helps clients move their investment properties into new corporate structures.
ROYAL PROTECTION PLAN
Our Royal Protection Plan is a complete asset protection plan that uses every tool at our disposal to make you and your properties judgment-proof.
An estate plan is a legal strategy that addresses how your money and other assets will be distributed upon your death.