should i convert sch e property to LLC

is there any benefit to taking a schedule E rental property and creating an LLC for it? Thank youi

Yes, it can insulate the taxpayer from some personal liability.

If your question is tax-related the LLC has nothing to do with taxes.

The property has to be titled to the LLC for the legal protection to work. One of my neighbors Air-BNB their FROG. They created an LLC, opened a bank account and run the rent money through the LLC bank account. They now think they’re protected if someone gets hurt on the property.

Have client who has multiple rentals who we set up LLC for. He has been titling them in the LLC. It has been a cumbersome process. Told him to be persistent and get it done, to Tax Me Up's point. Told him not exactly time sensitive, but to get it done ASAP

They now think they’re protected if someone gets hurt on the property.

News Flash! A new invention has just been developed, designed to protect you against a liability lawsuit. It's called "insurance". It does away with the old-fashioned "LLC" method of protection. An added bonus is that the injured person can actually get his doctor bill paid too.

"But my realtor friend told me to set up LLC"

So unless i am incorrect, the conversion to LLC offers no tax savings/benefit but does offer , of course, liability protection?
but if they were in the real estate business they would get the deductions they dont get now since its passive?

If they are a real estate professional it doesn't matter if they own it outright or through a SMLLC.

and if they are not real estate professionals?

If they are a real estate professionalit doesn't matter if they own it outright or through a SMLLC.

*for federal income tax purposes.

Might be ramifications at the state/local level. OP is located in NYS. Last time I checked NYS has a return for LLCs and a franchise tax.

Form IT-204-LL

SMLLC taxed as a DRE pays $25 each year in franchise tax.

Should consider mortgage issues....will the mortgage have to become a commercial mortgage with a higher rate
if title to the LLC?...............also, in NY you are supposed to place ads when form an LLC....in NYC can be costly.....good to check with lawyer about this.......

Has anyone here had a client successfully keep a property titled in an LLC safe from a judgement? Just curious. The process to title a property encumbered with a mortgage is a warranty deed; nothing too complex. However, if the client wishes to refinance the property, they are required to change the title of the property back into their names, then refinance. Then, after refinancing, another warranty deed is required to put the property back into the LLC. Fun times!

I’ve read LLC case law where an LLC can protect against a judgment, but I wonder if the LLC really holds up.

An LLC without sufficient assets or insurance will not likely protect the owner from liability for personal injuries under an alter ego theory. Insurance is always prudent and also provides a defense to lawsuits. Not clear to me why one would hold title in a single member LLC. I use LLC's to hold title where I have multiple investors/owners. Mortgages are available to LLCs but the members may need to personally guarantee the loan.

As an aside, if you don't mind...... IF one goes about deploying LLC (rentals), pros/cons not withstanding, if there are ten residential rentals, should there be ten LLC"s or will one LLC suffice for all ten units? ty

That is a nuanced question that isn't really all that simple.

It should take into consideration risk exposure, FMV of the 10 rentals, and administrative overhead and burden.

For example, a CA client with 10 CA rentals might not appreciate the 10 new LLCs his attorney created when tax time rolls around and he informs his CPA.

Depends on state law, Bob. Some states will allow for a Master LLC, but you'd still have separate LLC's for each property and have to keep separate books and file them separately....not much advantage that I've ever seen. Most atty's would likely suggest separation for liability. You don't want one slip and fall in building 8 to take down all of them.

Back on this subject..... a client is coming into seven figure$, from a business sale, is interested in developing property as an investment, with his wife, should they open one smllc or an llc with each of them listed as a partner? they intend to eventually hold multiple properties ....... what's the best entity for a venture like this? thanks for any input