Topic 02 · 6 min read
Entity Structures and Asset Protection
Who owns the building matters as much as what it earns.
Property can be owned personally, in an LLC, in a partnership, or through a corporation. The choice affects how income is taxed, what happens if someone sues, and how easily you can bring in partners or pass the property on.
What to know
- LLCs are the default
- A single-member LLC is ignored for tax purposes — income still lands on your personal return — while the liability shield stays in place.
- Partnerships for multiple owners
- Two or more owners usually file a partnership return, and the agreement can split profits, losses, and depreciation in ways that ownership percentages alone would not.
- S corporations rarely hold real estate
- Getting appreciated property back out of a corporation can trigger tax. Most advisers keep buildings out of corporations.
- Separate entity per property
- Holding each building in its own LLC keeps a problem at one property from reaching the others.
- Respect the structure
- Separate bank accounts, signed leases, and real records are what keep a court from treating the entity as a formality.
The tax benefit
Pass-through treatment avoids a second layer of corporate tax while flexible partnership allocations put deductions where they do the most good.
Worked example
Three buildings, three LLCs
An owner moves each rental into its own LLC, all owned by one holding company. A tenant injury claim at one property reaches that LLC only, and the tax reporting is unchanged.
Watch out for
- Transferring a mortgaged property into an entity can trip a due-on-sale clause — ask the lender first.
- Entities cost money each year in filings and state fees.
- An LLC alone does not replace adequate insurance.
Terms from this topic
LLCPass-throughDisregarded entityPartnership agreement
0 of 11 topics done in this installment.