Often creating an LLC to hold real estate investments is an excellent practice. Yet it really depends upon the number of properties in the portfolio, their value, and your liability exposure. Forming an LLC is a financial investment, first by filing the articles of incorporation paperwork, establishing bank accounts and its accompanying accounting books, and then preparing annual tax returns. In California, there’s a minimum state tax of $800. You can see how these expenses can add up, especially if you hold each property separately. Let’s use an example of a $10 million dollar rental property such as an apartment building. Something occurs and you are sued. Your liability insurance may not be enough and litigants can go after what the LLC holds. The good news is that assets held outside of the LLC can’t generally be reached. Therefore it’s a business decision to determine your liability exposure and how many LLC entities you need based upon your real estate investment portfolio. We can help you navigate the entity choices for a real estate investment portfolio as well as proactive tax planning and projections.