ComplianceLegalFebruary 18, 2020

Forming a Delaware LLC to invest in real estate

Delaware is a popular choice for LLC Formation. In fact many attorneys recommend forming Delaware LLCs to invest in real estate.

What are some of the reasons behind it?

  1. Investing in real estate can be a risky business. A lawsuit brought about by accidents and/or injuries occurring on the grounds may prove to be disastrous for an individual investor, even with Liability Insurance. Loss of all of one's personal assets could be at stake. Forming and properly maintaining a Delaware LLC to invest in real estate will add a layer of protection, shielding the personal assets of its members.
  2. The Delaware LLC can be formed quickly and easily.
  3. Ongoing maintenance of a Delaware LLC is straightforward. Delaware just collects a flat $300.00 franchise tax by June 1 of each year. There is no annual report filing requirement.
  4. There are potential tax benefits. For starters, single member and multi member LLCs enjoy pass through taxation, instead of double taxation like that of a C Corp.
  5. Foreign ownership in a Delaware LLC is permitted, presenting a pass through taxation incentive for international investors.
  6. Having a Delaware LLC adds a level of privacy. Since the State of Delaware does not require public disclosure of members at the time of formation, and does not have an annual report filing, members can choose not to have their information appear in public records.
  7. Delaware's Chancery Court is greatly esteemed both domestically and abroad. Judges, not juries, hand down quick and fair decisions based upon their knowledge of business law and reference to preceding cases.
  8. Multiple LLCs can be created for multiple real estate investments. With the creation of separate LLCs, individual investments are insulated from one another.

As you can see, there are many benefits to forming a Delaware LLC to invest in real estate. That said, it's always best to consult an attorney and/or accountant before proceeding.