Many apartment building owners should put the title to their apartment buildings in the name of a limited liability company. Why? The LLC combines the best aspects of individual ownership and corporate ownership, and leaves the worst aspects behind.
The worst aspect of individual ownership is unlimited liability. If your tenant sues you, ALL of your property is in jeopardy. Your home, your bank accounts, your stocks and bonds – all could be lost if your insurance does not cover you, or is inadequate.
The best aspect of individual ownership is tax depreciation. Individuals qualify for the most generous depreciation deductions. In addition, no complicated corporate tax returns are required.
The best aspect of corporate ownership is limited liability – a lawsuit by a tenant against the corporation, is confined to the corporation. Your other assets are protected from the lawsuit.
The worst aspect of corporate ownership is limited tax deductions for depreciation. In addition, corporation tax returns are an additional required expense.
The LLC combines the best of both corporate and individual ownership. It has the limited liability of a corporation, and allows the full deductibility that an individual gets for depreciation.