OPENING AN LLC
NOT REQUIRED BUT RECOMMENDED
LLC = Limited Liability Company
Q: Why form an LLC for Real Estate Investments?
A: Personal Protection!
The most common ownership options when purchasing investment properties
in the U.S. are:
- In your own name, meaning that you are the personal owner registered for this property.
- Through an LLC – Limited Liability Company. Meaning that the company owns the property and you own the company. Most investors use LLC's when investing in U.S. real estate.
At American Eagle Equity LLC we prefer the LLC entity because it offers you personal protection in the event of a law suit concerning your property. Real estate investors that rely solely on liability insurance as a means of protection from personal liability take a significant risk should the judgment against them be larger than the liability insurance the investor holds. In such a situation, the investor can be personally liable to pay the judgement from his personal finances, even if it means liquidating assets here in Israel. While the chance of a loss that exceeds policy limits is remote, if it happens, the consequences can be devastating for you and your family if the ownership of the investment property is in your name.
By having the property listed in an LLC, , should a judgement against you exceed your liability insurance, you only exposure would be the properties owned by you LLC. Your personal assets, whether in Israel or in the U.S. are protected and claims cannot be made against them. An LLC is a "defensive shield" for your personal assets.
Q: Does an LLC pay taxes like Ltd. or Inc. companies?
A: NO!
As far as the IRS is concerned, the LLC is a "pass-through" or "transparent" company. The LLC files a tax return stating its income but only the owner of the LLC pays taxes (if required). There is no down-side to owning an LLC, and the liability protection is valuable.
We recommend forming your LLC in the state that you plan on investing in.
