Why LLCs Are the Best Choice for Rental Business in Illinois
Misunderstandings between tenants and landlords are unavoidable. At times, they can even turn into bigger issues that end up as lawsuits. This is where an LLC business structure can come in handy. LLCs provide business owners with a certain level of protection by minimizing liabilities. Meaning to say, if one of your properties gets sued or accrues debt, you will not be forced to pay up out of your own pocket. Hearst Newspaper also mentions how this rule still applies even to certain legal claims such as slip-and-fall cases or disputes with tenants over contractual disagreements.
Money management can cause you a headache, especially if you have a lot of properties to oversee. Fortunately, with an LLC, this difficult process can be a whole lot easier. For instance, when your properties have their own LLCs and bank accounts, rental income for each place will go into their respective bank accounts, thereby reducing the likelihood of commingling funds. Mortgage payments, repair costs, and other similar expenses for a certain property can also be taken out from its own bank account, allowing you to track each property’s cost and income in an extremely organized fashion.
One of the most tedious parts of establishing a business is managing your taxes. Sometimes when you are handling many properties at once, filing your taxes can become extremely overwhelming and confusing. Like in any other state, LLCs in Illinois help owners avoid being taxed twice. The establishment of the business as its own legal entity means that the owners are only required to pay personal taxes rather than paying taxes on their individual earnings and the company’s profits. Just imagine how much tax you’d have to pay as a sole proprietor if you considered all the earnings of all of your properties!
The biggest benefit of registering as an LLC is having your personal assets protected. This benefit is especially advantageous for real estate business owners who have several properties under their name. With a separate LLC for each and every single one of their properties, owners can rest assured that even if one of their properties gets sued, the others would not be affected. This is because the LLC recognizes every property you own as a standalone business that you shouldn’t be fully liable for.
These are only some of the benefits LLCs can offer to real estate business owners. Before you start registering your properties as LLCs, make sure to visit Illinois’s website for Corporate & Limited Liability Company (LLC) Name Search, so you can see if the name you want to use is still available. You may also want to check out our previous post, ‘5 Reasons a Pre-listing Inspection Will Make You Money’, to learn about how you can generate even more income as your business progresses.