Case Studies
Real Estate
Example: Let’s say you want to buy some rental property but you know how risky it is to have tenants. So you decide to form an LLC and have the LLC buy the property. This prevents you from being held personally liable if the LLC were is sued.
Example: You already own a corporation but you want to buy some property personally that the company might be using in the future. So you form an LLC and have the LLC purchase the property. In a few months the corporation decides it needs that property to expand, so the corporation leases the property from the LLC. This allows you to sell the property in the future without having to pay the additional tax generated by selling a piece of property in a corporation.
Operating Business
Example: A small group of family, friends or business associates decide to start a small consultation firm. Instead of forming a partnership which adds risk to everyone involved, they decide to form an LLC. This provides limited liability to everyone. In addition, some people are buying ownership with cash while others are going to be providing their services. Since they can adjust the distribution however they want, they decide people who contribute cash are going to get a higher percentage of distributions than the people who are committing services.
Investment Club
Example: John, a W-2 employee, and some family members, decided to start an investment club. They will to pool their money and buy real estate, stocks and maybe some options. They did some research on which business entity would suit their needs and in the end selected an LLC.
All the members want to have a say in which investments the club participates in. An LLC allows for the flexibility in management they are looking for. It is also a lot easier to transfer assets in and out of an LLC vs. a corporation. With a corporation you run into a capital gains issue when you sell property. Because an LLC can be taxed as a pass-through entity, you can greatly reduce your capital gains.
Holding Property
Example: Susan has invented a proprietary software program which allows people to search the internet twice as fast. She knows it will be a few years before she will actually sell the software to another company, as she is still working out the kinks and wants to make sure she got the right deal. So she decides to place the patent in an LLC which allows her to plan for future tax saving benefits.
Due to their relatively inexpensive start-up costs and ease of management, the LLC serves as a great tool for holding real estate, trademarks, patents, and other assets.
LLCs are also great tools for small operating businesses. While LLCs don’t provide some of the same fringe benefits as a C-corporation, the flexibility and simplicity of ownership make it the ideal tool for a small company looking for asset protection.
This information is for general purposes only. All that we do is submitted and performed with the understanding that we are not engaged in rendering legal, accounting or other such professional service. If legal advice or other expert assistance is required, the services of a professional should be sought.
