Should You Put Your Rental Property in an LLC?

When you buy your first rental property, you’ll have a lot of decisions to make. One of the biggest questions is:Should I put this property in an LLC—or just own it in my own name?

I own 18 rental doors across 8 properties. And they’re held through 9 separate companies. I know—that sounds like overkill at first. But once you understand how it all works, it actually makes a lot of sense. Here’s how I think about it, and what you should know before you decide what’s right for you.

The Main Reason: Liability Protection

The biggest reason to use an LLC is to protect yourself from lawsuits. It’s not super common, but if something bad happens—like a tenant getting hurt on your property—they could come after you personally. That means your savings, your house, your car... all of it could be at risk.

Putting your rental inside an LLC creates a kind of legal wall. If someone sues, the lawsuit usually stops at the LLC. It doesn’t guarantee you’ll never deal with legal trouble, but it gives you a shield—and that can be a big deal if something ever goes wrong.

When You're Just Starting Out

If you only have one or two properties, using an LLC might feel like more trouble than it’s worth. You’re probably managing things yourself, you know your tenants, and everything feels pretty low-risk. In those early days, the chance of being sued is small—and legal problems are usually easy to avoid with good communication.

But as your portfolio grows, things change. You might start working with property managers or employees. You’ll know less about what’s happening day-to-day. Mistakes become more likely. And tenants may assume you’re wealthy—even if you’re not. All of that adds to your liability. That’s when the protection of an LLC becomes more valuable.

Waiting to Set It Up Can Be a Headache

If you don’t create an LLC from the start, it gets harder to do later. You’ll have to move each property into the new company, which can cost money and take time. The more properties you own, the more painful it gets to make the switch. That’s why I recommend figuring out your long-term plan early—even if it feels like overkill right now.

Is It Okay to Own Rentals in Your Own Name?

Yes, absolutely. There are landlords out there with huge portfolios who never used LLCs. In my city, there was a billionaire named Harlan Douglass who owned thousands of units—all in his personal name. He spent a lot of time in court, but that didn’t seem to bother him. If you’re okay with the risk and don’t mind the fight, personal ownership is still an option.

Other Benefits of Using an LLC

LLCs aren’t just about lawsuits. They also help keep your business separate from your personal life. For example, my LLCs have their own bank accounts, file their own taxes, and even have their own credit history. That makes accounting and tax prep much easier. When everything is separated and organized, your business becomes more professional and much simpler to manage as it grows.

But It Comes with a Cost

Setting up and maintaining LLCs isn’t free or effortless. There are filing fees, renewal fees, and extra accounting work. You’ll need to track income and expenses separately, and keep clean records for each LLC. It’s more paperwork, more time, and more frustration. I complain about it every year—but I keep doing it because I know it’s worth it.

Choosing the Right Setup

If you decide to use LLCs, there are a few ways to set things up.

Some people start with a single LLC that owns all their properties. This is simple and easy to manage. It gives you protection, but everything inside that one LLC is still connected. If one property causes legal trouble, all your other properties in the same LLC could be affected.

A more advanced setup is to create a holding company LLC that owns smaller “child” LLCs. Each child LLC holds one property (or a small group of properties). That way, problems in one LLC don’t spread to the others. It’s more secure and easier to scale—but also more expensive and more work.

There’s also a third setup where each property is in its own LLC with no holding company. I don’t recommend this. It creates a mess and makes it hard to share costs or manage things efficiently. I’ve only seen one person try it—and they regretted it.

How I Do It

From the very beginning, I used the holding company + child LLC structure. At first, it felt silly. I only had two doors and I was filling out a mountain of paperwork. But as I grew, it started to pay off.

Now I’ve got a clear system for setting up new companies with my lawyer, accountant, and banker. Everything is organized, my legal protection is solid, and I can expand without worrying that I’m adding risk. It works, and I wouldn’t do it any other way.

So What Should You Do?

It really comes down to what matters to you:

• How much protection do you want?

• How big do you plan to grow?

• How much time and energy do you want to spend?

• How much risk are you okay with?

  
  

Once you answer those questions honestly, the best option for your situation usually becomes pretty clear.

If this helped you think through how to set up your rental business, feel free to leave a comment, follow, or send me a message. I love talking real estate—and helping people get started the smart way.