Most of what people have posted on here is correct. If you own more than just your own home in real estate–especially an investment property–you’d do well to put it in an LLC. LLCs are like corporations but with less “maintenance” and single-member LLCs are pretty easy and simple to form. They are designed to give the liability protection of a corporation but the tax treatment of a partnership. Nolo is a great do it yourself source, but if you are getting into large investment amounts, you should heed the advice to use a lawyer.
If you are investing with others, a lawyer will be essential as there are very tricky provisions that will need to be carefully thought out for tax purposes. Typically you form an LLC, get the loan (typically with personal guarantees from the members). You can also deed property you already own into an LLC but you’ll probably need to get consent of the bank for any already outstanding loans.
LLCs require very little record keeping (unlike corporations), there is no “corporate veil” aspect, and the taxation is flow-through. Single member LLCs can elect to be “disregarded entities” and piggyback on the individual. Nor do you have to have any actual employees–so you don’t have to pay payroll unless you do actually hire people through the business. Be careful in this area as well as “independent contractors” who look, smell and sound like employees will be deemed so and then you will have to treat them as such.
CA will soak you for $800 a year and you will still want to get insurance, etc for the property.
The benefit of having an LLC own the property is that any claims are limited to the investment and profits of the LLC. If that amounts to $50K,then that is all the plaintiff gets. They can’t go after your personal assets. Some investors even put each investment property into its own, separate LLC so that the liabilities of one property cannot be levied against the other(s).
Obviously there are lots of things to consider, so consult a lawyer if your situation warrants it.
