Should I open a holding company and an LLC for my investment property?

UPDATED: Mar 6, 2012

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Should I open a holding company and an LLC for my investment property?

I am thinking about renting out my one bedroom co-op (which I own) and buying a 2 family house. I will occupy one apartment and rent out the second unit. I was told that I should open up my own company for “tax reasons”. I was reading that I should open a holding company that owns 100% of the LLC that I would also need to open. Does anyone know what the advantages and disadvantages are? What’s a good strategy?

Asked on March 6, 2012 under Real Estate Law, New York


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

You should speak with a CPA, tax attorney, and/or financial planner (preferably, one with a CPA or JD) about your situation in detail. There is no simple, one-size-fits-all answer, since the specifics of your finances, the property, your goals, etc. determine what is the right thing to do.

All that said, there are good, non-tax reasons to own investment property through an LLC (or, for that matter, a corporation, such as a sub-S): you want to limit your personal liability for business debts (e.g. property tax; loans; amounts owed utilities and contractors) and for any possible tort-based liability (e.g. what if somone slips and falls at the property because a stair was loose?). Therefore, while you should discuss your situation in depth some tax or financial-related professional and follow his/her advice, I assume you will in some form own the property through an LLC or other business structure, so as to protect your personal property, income, and assets.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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