There is a moment, right after someone buys their first rental property, when a well-meaning person tells them to “put it in an LLC.” So they do. They file the paperwork, they open a bank account in the LLC’s name, they feel protected.
A lot of the time, they are not. And they have no idea.
The internet’s answer to where real estate should live is not wrong. It is just shallow. “Put it in an LLC” is correct advice delivered without the two things that actually determine whether it works: why an LLC, and whether you actually did the one step that makes the protection real.
Start with the why, because it is not the reason you have been told. Everyone says asset protection. That is true, but the deeper reason is taxation. An LLC is taxed as a partnership, and partnership taxation is the single best way the tax code has to hold real estate. It lets you build basis from your mortgage, deduct depreciation against it, and pull the property back out years later, appreciated, without paying a dime of tax to do it. A corporation cannot do any of that, which is why putting real estate in an S-corp or a C-corp is one of the most expensive mistakes an owner can make, and one of the hardest to undo.
Then there is the part almost nobody checks. An LLC only protects what it owns. If the deed is still in your personal name, the LLC you formed is an empty box. It protects nothing, and the first time a tenant’s lawyer looks at the county records, they will know it.
So this is the whole picture. What a real estate holding company actually is, why partnership taxation makes the LLC the right home, why a corporation is a door that only locks behind you, whether your LLC protects you at all, and how to structure it when you own more than one property. Get this right at the start, because almost none of it is cheap to fix later.
What is a real estate holding company?
A real estate holding company is a parent entity, almost always an LLC, that exists to own real estate rather than to operate a business day to day. In the common structure, the parent LLC owns a separate subsidiary LLC for each property, and the parent holds the ownership interests while the property LLCs hold the actual real estate. The point is separation: separation of the properties from each other, of the real estate from your personal assets, and of ownership from daily operations, all of which limits how far a single lawsuit or debt can reach.
A real estate holding company is an entity, usually an LLC or a set of LLCs, set up to hold real estate. It is called a holding company because it “holds” the real estate rather than running the operating business, but mechanically it is not different from any normal LLC. The name describes the job, not a special kind of entity.
For a single residential rental, the operating side and the real estate side are often the same entity. One LLC owns the property and handles the rent, and that is fine at that scale. Once you expand into multiple properties, a separation starts to make sense: a management company runs the day-to-day operations, and separate entities hold the actual real estate. Push further and you land on the full holding company structure, where one parent entity owns several property-holding LLCs beneath it.
For a business that operates outside of real estate, a manufacturer, a dental practice, a law firm, the operating entity and the real estate entity are usually kept separate from day one.
Keeping real estate separate from operations does a lot of work. The biggest is liability. Real estate is often the largest asset an owner controls, and you do not want a slip-and-fall at a rental, or a lawsuit against the operating business, to be able to reach across and take the building too. Walling them off limits how far any single claim can travel. That protection only works if it is done correctly, which is a bigger “if” than most owners realize, and we get into exactly how it fails later in this article.
There is a second reason business owners keep the building in its own entity, and it is the one they appreciate most twenty years in: you can sell the business and keep the real estate. The buyer of your practice or your shop still needs somewhere to operate, so they become your tenant. You walk away from the work and keep collecting rent. A $6,000-a-month lease that outlives your working career is a retirement plan the operating business could never have handed you.
Should you hold real estate in an LLC?
For investment and business real estate, yes. The reason the internet gives is asset protection, which is real: an LLC separates the property from your personal assets. But the deeper reason is taxation. An LLC is taxed as a partnership by default, and partnership taxation is uniquely suited to real estate. It lets you deduct losses against your basis including your share of the mortgage, distribute appreciated property out to yourself later without triggering tax, and step up the basis of assets in specific situations. A corporation can do none of that.
An LLC, taxed either as a disregarded entity when it has one owner or as a partnership when it has two or more, is usually the best vehicle for holding real estate. LLCs are easy to set up and maintain, they are pass-through, and they provide the limited liability protection real estate needs. That much you can find anywhere. Here is what most articles skip.
A partnership lets you build basis from debt. Your share of the entity’s liabilities adds to your outside basis under §752, and basis is what lets you actually deduct losses on your personal return, including the losses that depreciation creates. Say you and a partner each put $50,000 into an LLC and the LLC borrows $800,000 to buy a $900,000 building. Your basis is not just your $50,000. It includes your share of that $800,000 loan, so roughly $450,000. When cost segregation throws off a large first-year depreciation loss, you have the basis to deduct it. In a corporation, the entity’s debt does not lift your basis, so those same losses can get suspended waiting for basis that may never come.
A partnership also lets you take property back out tax-free. This is the one that matters most and the one nobody mentions. Under §731, you can generally distribute appreciated real estate out of a partnership to a partner without triggering gain. Do the same thing in a corporation and it is a taxable event, taxed as if the corporation sold the building at full market value. Getting real estate out of a corporation is genuinely hard, and we will show you exactly how hard in the next section. Getting it out of a partnership is often a non-event.
And a partnership is customizable in a way a corporation can never be. On a partnership return you can make special allocations, which means the income, depreciation, and deductions do not have to follow ownership percentages. Two 50/50 partners do not have to split everything 50/50.
Here is why you would use that. Say you are a 50/50 partner with someone whose income puts them in the 37% bracket, while you are down in the 24% bracket. You can allocate more of the depreciation and deductions to your partner, where a write-off is worth 37 cents on the dollar, and more of the taxable income to you, where it is taxed at 24 cents. Same building, same partnership, and the two of you have quietly moved deductions to where they are worth the most and income to where it is taxed the least. A corporation cannot do this at all. Everything in a corporation runs strictly pro-rata, so your slice is your ownership percentage and nothing else. (Special allocations have to follow the substantial economic effect rules, so this is a “do it with your CPA” move, not a free-for-all.)
There are a few edge cases where an LLC is not the best home for real estate, but in the overwhelming majority of situations, it is the superior choice, and the reasons run a lot deeper than the asset protection everyone leads with.
Can an S-corp or C-corp own real estate?
It can, and it usually should not. A corporation holding appreciated real estate is a one-way door. In a C-corp, selling or distributing the property is taxed twice, once at the corporation and again when the money reaches you, and the property gets no step-up at your death. In an S-corp, distributing appreciated property to yourself triggers gain as if you had sold it, under §311(b). Either way, you can put real estate into a corporation easily and you can almost never get it out without a tax bill. The LLC has no such trap.
When you own a business, an S-corp or a C-corp, and you decide to buy your own commercial building, the instinct is to buy it right there inside the business. The building goes with the business, it is simple, it is one less entity to run. It is also, in most cases, wrong.
There are situations where holding real estate in a corporation is correct. They are the exception, not the rule, and we will get to them.
Start with the C-corp, which is famous for double taxation. Profits are taxed at 21% at the corporate level, then taxed again as a dividend when the money comes out to you. Put a piece of real estate inside a C-corp and you hand that same double layer to your building.
The property gets locked in. Pull it out later and it is a taxable event. And “later” arrives for a specific, common reason: you want to sell the business but keep the real estate, so the new owner keeps paying you rent. Sell the property inside the corporation and the gain is taxed at the corporate level. Move the cash out to yourself and it is taxed again. That double hit eats a large share of the appreciation the building spent twenty years earning.
You also lose the step-up at death. People die and get a step-up. Corporations do not. Normally, when you leave real estate to your heirs, its basis resets to fair market value at your death, which wipes out the built-in gain and lets them sell it with little or no tax. Real estate trapped in a C-corp gets none of that. Your heirs inherit a corporation holding a low-basis building with all its appreciation still taxable, and no reset.
And a real-estate-only C-corp can trigger the personal holding company tax. If a closely held C-corp’s income is mostly passive, like rent, it can be classified as a personal holding company and hit with an extra tax on undistributed income, on top of the regular corporate tax. It is an anti-abuse rule aimed at exactly this: parking passive assets in a corporation.
Now the S-corp, which is not much better. Once real estate goes into an S-corp, getting it back out is expensive. Transfer the building from the S-corp to yourself and §311(b) treats it as a sale: the corporation recognizes gain as if it had sold the property at fair market value, and that gain passes through to your return. You owe the tax without a single dollar changing hands.
Here is what that looks like with numbers.
You bought a commercial building for $1,000,000 and depreciated it down to a $700,000 basis. It has since appreciated to $1,750,000. You decide to separate the building from the operating business, so you retitle it from the S-corp into your personal name. Nothing was sold. No buyer, no cash, no closing.
The IRS sees a sale anyway. Under §311(b), the gain is $1,750,000 minus your $700,000 basis, which is $1,050,000 of gain recognized. At a combined 25% capital gains and state rate, that is roughly $262,000 in tax, due on a transaction where you received nothing. You moved a deed and triggered a quarter-million-dollar bill.
The same thing happens if the business closes. Wind down the S-corp and it has to distribute its assets to the shareholders, and that distribution of the appreciated building is the same deemed sale, with the same tax.
The through-line: real estate is an appreciating asset you plan to hold and eventually sell or pass on. Corporations are built to hold appreciation inside them, not to let it out. That is the entire mismatch.
There are narrow exceptions.
A real estate flipper might hold property in an S-corp, but notice why: a flipper is not holding for appreciation, they are buying and selling inventory. Their property is dealer property, it never qualifies for the tax-free hold-and-extract treatment in the first place, and the S-corp is there to trim self-employment tax on what is effectively active business income. The exception proves the rule. The corporation works for them precisely because they are not doing what this article is about.
There are also planning moves that deliberately use a corporation for a short, specific purpose, like selling a primary residence into an entity to lock in the §121 exclusion. Those are surgical, single-purpose plays run with an advisor, not a reason to park a building you intend to hold for decades.
Do you get liability protection if the property is in your personal name but you have an LLC?
No. Liability protection comes from the LLC owning the property, and ownership is determined by the deed, not by having formed an LLC or opened a bank account for it. If the deed is in your personal name, you are the owner and the landlord in the eyes of the law, and a lawsuit over the property reaches your personal assets directly. There is no veil to pierce, because an LLC that does not hold the property is an empty box that shields nothing. To get protection, the deed has to be in the LLC's name.
The default move for someone buying real estate is to open an LLC. Half the time they could not tell you why. They know it is what people do, so they do it too.
The reason people form them is to limit liability. You wall the risk off inside a specific entity, so that if something happens at your rental, it stops there instead of reaching into your other assets. This matters most with property, because property is where people get hurt. A tenant slips on an icy step, a contractor falls off a ladder, a guest is injured at a short-term rental, and they sue. If the property is not held in a separate entity, that lawsuit does not stop at the real estate. It continues straight into your personal assets: your home, your savings, your other investments.
Here is where people get it wrong, and it is the single most common real estate mistake we see.
They form the LLC, open a bank account in the LLC’s name, run the rent and the repairs through that account, and stop. They never retitle the property.
The LLC only protects what it owns. If the deed and title are still in your personal name, then you own the real estate, not the LLC. The bank account does not matter. The operating agreement does not matter. The thing that generates the liability, the property, is yours personally, so the liability is yours personally. There is nothing for a lawyer to pierce, because the LLC was never standing between you and the property in the first place. The first time an injured tenant’s attorney pulls the county deed records, they will see your name on it, and the empty LLC you formed will not slow them down for an afternoon.
To fix it, the deed has to move into the LLC. Which sounds simple, and then you hit the mortgage.
Before you retitle anything, understand your loan. Most mortgages have a due-on-sale clause, which says that if you transfer title, the lender can treat it as a sale and call the entire loan due immediately. In practice, lenders rarely call a loan that is being paid on time, because they want the payments, not your building. But they legally can, and the risk is higher when current rates are above your loan’s rate, because then calling the loan actually benefits them. So do not move a deed in silence. Talk to your lender first.
If the due-on-sale clause is a concern, you have real options.
Refinance into the LLC. If today’s rates are at or below your current loan, refinancing the property into a commercial loan held by the LLC is often the cleanest path. You retitle and finance in one move, and the protection is real.
Buy it in the LLC from the start. This whole problem disappears if you have not bought yet. Set up the LLC first and have it purchase the property, with your personal guarantee. You will likely be in commercial lending, so the rate may be a little higher, but the property is in the right place from day one and there is no deed to move later.
Pay off a small loan. If the balance is small enough, paying it off removes the due-on-sale question entirely, and then moving the deed is trivial.
Ask a lawyer about a land trust. A land trust has been used as a workaround for the due-on-sale clause. It is aggressive, the mechanics matter, and we do not practice law, so this is a conversation for your attorney, not a step to take off a blog post.
And here is the protection almost nobody leads with, the one you should have in place regardless of your entity: umbrella insurance.
Insurance is your first line of defense. The entity is your second. Even a perfectly formed LLC that owns the property free and clear does not make you untouchable, and leaning on it as your only protection is a mistake.
Two reasons an LLC alone is not enough. First, the LLC does not protect you from your own actions. If you personally do work on the property, the wiring, the deck, the repair, and it fails and injures a tenant, you can be found personally liable for your own negligence no matter how clean the entity is. Second, the veil can be pierced. Commingle personal and LLC money, skip the formalities, run the whole thing loosely, and a court can decide the LLC is a sham and reach through it to your personal assets anyway. A good landlord policy and a personal umbrella policy sit in front of all of that and pay claims the entity was never designed to pay.
One last point, and it runs through everything above: this is state-specific, fact-specific legal territory, and we are giving you the tax and structural lay of the land, not legal advice. Before you retitle a property, form a structure, or lean on any of this for protection, talk to an attorney licensed in your state or the state the property sits in. And do it early. The best time to get the structure right is before you own the property, when everything can be set up clean from the start.
Should each rental property have its own LLC?
For most investors with more than one property, yes, and that is the whole point of a holding company. If all your properties sit in one LLC, a lawsuit or a debt tied to any one of them can reach all of them, because they are all owned by the same entity. Put each property in its own LLC, owned by a parent holding company, and you wall the properties off from each other. A judgment against one property is limited to that property. The tradeoff is cost and administration, one LLC's fees and filings per property.
Once you have decided an LLC is the way to hold your real estate, the next question is how many you actually need.
If you own one property, it is simple: keep it to one LLC. You do not need a separate operating entity and a holding entity for a single rental. One LLC owns it and runs it, and that is enough.
As you add properties, structuring them across multiple LLCs starts to earn its cost, and the reason is the same one from the last section: liability. The problem with holding everything in one LLC is cross-liability. If all six of your rentals sit in a single LLC and a tenant at one of them wins a judgment, every property in that LLC is on the table, because they are all owned by the same entity. You did not wall the properties off from each other. You just put them all in the same room.
Give each property its own LLC, owned by a parent holding company, and a judgment against one is limited to that one. The other five are out of reach.
The cost of that protection is compliance, and it scales with every entity you add. Each LLC means its own formation fee, its own annual state fee or franchise tax, its own annual filing, its own set of books, and its own bank account. If your state charges $800 a year per LLC, ten properties in ten LLCs is $8,000 a year in state fees alone, before you count the bookkeeping and the extra tax-prep time.
So the real move is to balance liability against compliance rather than maximizing either one. A middle path a lot of investors use is to group properties by risk. All the long-term rentals in one LLC, the short-term rentals in another, the commercial building in its own. Or group by geography, with one LLC per state or market. You are not isolating every single property, but you are keeping the risky assets away from the safe ones and containing any single lawsuit to a slice of the portfolio instead of all of it.
The rule of thumb: the more equity you have exposed, the more per-property separation earns its keep. One modest rental with a big mortgage and little equity does not need a holding company. A portfolio of paid-down properties with real equity in them is exactly what a holding company is built to protect.
How do you move real estate out of an S-corp or C-corp?
Carefully, and often expensively, which is exactly why the entity decision matters so much up front. Moving appreciated real estate out of a corporation is usually a taxable event: the corporation is treated as selling it at fair market value, so the built-in gain is recognized. There is no tax-free undo. The realistic paths are to leave it where it is and manage around the constraint, to plan the extraction over time, or to accept the tax cost to get it into an LLC before it appreciates further. The best move is almost always to have never put it there.
There is no clean undo button when real estate ends up in the wrong entity. But how hard the fix is depends entirely on what “wrong” means, and the two versions could not be further apart.
If the property is in an LLC or a partnership, taking it back out is easy. Most of the time the distribution is not a taxable event, thanks to the §731 treatment we covered earlier, so you can move the real estate where it needs to go without a tax bill.
If the property is in an S-corp or a C-corp, you have to be careful. Pulling real estate out of a corporation can be treated as a sale and trigger tax, and it is the worst kind of tax, because you owe it as if you sold the property while receiving no money to pay it with. That is the phantom income problem, and it is the same deed-transfer-triggers-a-$262,000-bill scenario we walked through earlier.
It only gets worse with time. The more the property appreciates, the bigger the built-in gain, and the more expensive the exit becomes. So if you have real estate in a corporation and it has not appreciated much yet, this is the cheapest it will ever be to fix. Sometimes the right move is to admit the mistake and pull the property out now, before another decade of appreciation turns a manageable bill into an enormous one.
The other option is to leave it and live with the constraints: no step-up at death, no clean way to separate liability, and double taxation whenever you eventually sell or extract it. For a property deep into its appreciation, that is sometimes the least-bad choice. Just make it with your eyes open, knowing exactly what you are giving up.
We saw both problems collide in one client. He owned a rental, held it in an LLC, and then, for no clear reason, filed Form 2553 to have the LLC taxed as an S-corp. He ran it that way for a few years and then decided to dissolve the S-corp. We started digging in to size up the taxable event, because distributing an appreciated building out of an S-corp is exactly the §311(b) deemed sale we described above.
Then we found the twist. The property had never been titled into the entity at all. Not the LLC, not the S-corp. He had filed returns for years as though the entity owned the building, but the deed had been in his personal name the entire time. The entity owned nothing.
It saved him. If the building had actually been inside that S-corp, dissolving it would have forced a deemed sale of an appreciated property and a real tax bill. Because it never was, there was nothing to trigger. We cleaned up a few years of misfiled returns, corrected the record, and he walked away without the tax his own structure was built to create.
He got lucky, and it is worth seeing why. The exact same mistake that left him with zero liability protection, never moving the deed, is the only thing that saved him from a six-figure tax event. That is not a plan. That is a coin flip that happened to land right.
At the other end of the spectrum is the easy fix, and it is the more common one. You did the right thing and formed the LLC, but you never moved the property into it. Deed, title, and loan are all still in your personal name.
This is the cheap mistake to correct. There is no corporation holding built-in gain, no deemed sale, no phantom income. You just need the deed retitled into the LLC, which runs into the mortgage question from the liability section: talk to your lender first, refinance into a commercial loan if you have to, or pay off a small balance and move the deed clean. It is paperwork and a phone call, not a tax bill.
That is the whole asymmetry, and it is why the entity decision is worth getting right on day one. Fixing a personally-held property is a deed and a lender conversation. Fixing a building trapped in a corporation is a five- or six-figure tax bill that grows every year you wait. One is a Tuesday afternoon. The other is a decision you may eventually not be able to afford to make.
What are the most common real estate entity mistakes?
Five: holding appreciating real estate in a C-corp or S-corp where you cannot get it out tax-free, forming an LLC but leaving the deed in your own name so it protects nothing, putting every property in one LLC so a single lawsuit reaches them all, skipping insurance because you think the LLC replaces it, and commingling personal and LLC money so the protection you paid for collapses. Every one is cheap to avoid up front and expensive to fix later.
Do not hold real estate in a C-corp or an S-corp unless you have a specific reason and an advisor who can defend it.
You lose most of what makes real estate worth owning. No step-up in basis when the owner dies, so your heirs inherit the full built-in gain. Double taxation on the way out of a C-corp. A deemed sale under §311(b) if you distribute it out of an S-corp, which means a tax bill on a transaction where no money changed hands.
The cost is not theoretical and it compounds. Every year the property appreciates, the exit gets more expensive, until eventually you are locked in by a tax bill you cannot afford to trigger.
This is the number one mistake we see with rental property, and it is almost always accidental.
The LLC usually was not formed to hold the property. It was formed to keep the rent separate from personal money, or because someone said to, and the titling was an afterthought that never happened. The owner has an entity, a bank account, and a filing cabinet full of paperwork, and zero liability protection.
The cost is the exposure they thought they had eliminated. Your personal assets are on the line for anything that happens at that property, and you will find out at the worst possible moment. If you want the protection, the deed has to be retitled into the LLC.
If all your properties sit in a single LLC, you have not separated anything. One lawsuit reaches all of them, because one entity owns all of them.
The opposite extreme has its own cost. A separate LLC for every property maximizes protection and maximizes compliance, and the fees, filings, books, and accounts add up fast across a portfolio.
For most investors the answer is in between: group properties by risk profile or by geography, so a claim against one is contained to a slice of the portfolio rather than all of it. The cost of getting this wrong runs both directions. Too few entities and one claim takes everything. Too many and you are paying thousands a year for protection you did not need.
A properly structured LLC does real work, but it is your last line of defense, not your first.
Your first line is insurance. Good landlord coverage on every property, and a personal umbrella policy over the top. The LLC limits how far a claim can reach. Insurance actually pays the claim, and it covers things the entity never will, including your own negligence.
The cost of skipping it is the whole point of having the structure. If a lawyer finds a way through the veil, or the claim is one your LLC was never going to stop, you are paying out of pocket for coverage that would have cost a few hundred dollars a year.
This is the mistake that undoes everything else. You can hold the property in the right entity, retitle it correctly, and still lose the protection by running personal money through the LLC’s account.
Keep them genuinely separate. Separate bank accounts, separate books, rent in and expenses out of the business account, and no dipping in for personal spending. Once you start treating the LLC’s money as your money, you are handing a plaintiff’s lawyer the argument that the entity is a sham and the veil should be pierced.
The cost is the entire structure. Every dollar you spent forming it, every year of filings, all of it fails at the exact moment you need it.
When should I talk to an advisor about how to hold my real estate?
Before you buy, before you transfer a property you already own, and immediately if any real estate is sitting in a C-corp or S-corp, because that one is expensive to unwind and only gets worse with time. The entity decision looks like a legal formality and it is actually a tax decision with a thirty-year tail, touching how much you can deduct now, whether you can pull the property out tax-free later, whether it steps up for your heirs, and whether the structure protects you at all. That is a wealth-and-tax question, and it is cheapest to answer at the start.
Here is what makes this one different from most of what we write about.
Almost every tax decision can be revisited. You can change your salary next year, add a retirement plan, switch how you handle reimbursements. Get one wrong and you fix it going forward.
Where your real estate lives is not like that. The property goes into a box, it appreciates inside that box, and the cost of moving it out grows every year it sits there. The decision is cheap on the day you make it and expensive to unwind five years later. That is the whole reason to think about it before you buy rather than after.
There is also a gap in who normally looks at this. Your attorney can form the LLC. Your lender can tell you what the loan requires. Your CPA files the return you hand them. None of them is usually the one asking whether the entity that protects you is also the entity that lets you pull the building out tax-free in twenty years, or whether the deed actually made it into the LLC your returns have been assuming for the last three years.
That question sits between legal, tax, and wealth, which is exactly where things fall through. It is also the kind of thing that is genuinely cheap to get right at the start and genuinely painful to fix later.
If any of these sound like you, it is worth a conversation:
Triggers:
The internet’s answer is right. Put your real estate in an LLC. It is just missing the two things that make the advice worth anything.
The first is why. Not asset protection, which everyone says, but partnership taxation, which almost nobody explains. Basis from your mortgage. Depreciation you can actually deduct against it. And the ability to pull an appreciated building back out, decades later, without paying tax for the privilege. A corporation cannot do any of that, which is why real estate goes into a corporation easily and comes back out expensively, if at all.
The second is whether you actually did it. The LLC only protects what it owns. If the deed still has your name on it, you have paperwork, not protection, and the county records will say so long before your attorney does.
None of this is complicated. It is just easier to get right at the beginning than at any point after. The box you choose today is the box the appreciation grows inside for the next thirty years, and by the time you want to move it, moving it is the expensive part.
Pick the box before you buy. It is the cheapest decision in this entire article and the only one you might not be able to afford to change.
An LLC is a single legal entity. A holding company is a structure built from several of them: a parent LLC that owns separate subsidiary LLCs, each holding one property. The LLC is the building block; the holding company is the way you arrange the blocks so a lawsuit against one property cannot reach the others. For a single property you may only need one LLC. For a portfolio, a holding company structure is how you keep the properties walled off from each other.
For investment or business real estate, yes. An LLC separates the property from your personal assets, and because it is taxed as a partnership by default, it also gives real estate specific tax advantages a corporation cannot: you can deduct losses against basis that includes your share of the mortgage, and you can distribute appreciated property out to yourself later without triggering tax. The main exception is your primary residence, which usually should not go in an LLC because it can cost you the home-sale tax exclusion and complicate your mortgage.
It can, but for appreciating property it is almost always a mistake. A corporation is a one-way door. Getting real estate out of a C-corp is taxed twice and the property gets no step-up at death. Getting appreciated property out of an S-corp triggers gain under §311(b), as if you had sold it. You can put real estate into a corporation easily and you can rarely get it out without a tax bill, which is why an LLC is the right home for it.
No. Liability protection comes from the LLC owning the property, and ownership is set by the deed, not by forming an LLC or opening its bank account. If the deed is in your personal name, you are the owner and a lawsuit reaches your personal assets directly. There is no veil to pierce, because an LLC that holds no property is an empty box. To be protected, the deed has to be in the LLC's name, which raises a mortgage question worth handling carefully.
Cost and complexity, mainly. You pay formation and annual state fees, file separate returns or schedules, and keep separate books and bank accounts, and those multiply if you use one LLC per property. Financing can be harder, since lenders may charge more or require a commercial loan for an LLC-owned property, and transferring a property you already own into an LLC can trigger the mortgage's due-on-sale clause. For a single small rental, the cost can outweigh the benefit; for a portfolio or a high-value property, it usually does not.
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