Do you need an LLC for your business or your real estate investments?
This is the most common question we get from entrepreneurs, side hustlers, and real estate investors—and for good reason. LLCs are one of the powerful tools for protecting assets, building legitimacy, and structuring ownership the right way.
But not everyone needs one.
After setting up over 10,000 LLCs nationwide through my law firm, KKOS Lawyers here are the four key scenarios where you absolutely should have an LLC—and what you’re risking if you don’t.
1. You Need Asset Protection
The #1 reason to form an LLC is to protect yourself from liability. LLC stands for Limited Liability Company—and the “limited” part is the whole point.
If something goes wrong in the business—whether it’s a tenant slip-and-fall, a customer lawsuit, or a product dispute—the lawsuit is forced to stop at the LLC. The suing plaintiff can only go after the LLC and its assets. That means your personal assets (home, savings, retirement accounts) are shielded.
Without an LLC, everything you own is at risk. And if you’re running a business or managing real estate, it’s not a matter of if liabilities arise—it’s when.
2. You’re Starting a Business and Want to Be Taken Seriously
If you’re working with customers, contractors, or vendors—or you want to hire employees—you need a real business structure. A DBA (“doing business as”) isn’t enough.
People take you more seriously when you have an LLC. It adds credibility and gives your business a professional structure for:
- Opening a business bank account
- Establishing a company name and brand
- Tracking business income and expenses- separate from your personal life
- Establishing business credit
- Applying for financing
- Contracting with potential customers
- Hiring Employees or Contractors
You want to build a legit business? Act like one. Set up an LLC. That being said, if you’re driving Door Dash on the weekends, you’re self-employed, but don’t necessarily need an LLC
3. You Have Business Partners or Investors
Anytime there’s another party involved—whether it’s a service-based partnership or a financial investor—you need clear documentation.
That’s where the operating agreement for your LLC comes in. It spells out:
- Who owns what
- What everyone’s responsibilities are
- How profits (and losses) are split
- What happens if someone leaves or needs to invest more capital
If you skip this step, you’re begging for a future dispute. This is your company’s prenup—don’t run a partnership without one.
4. You Own (or Plan to Own) Rental Properties
Rental properties come with liability risk—tenants, contractors, injuries, and more. That’s why real estate investors should use an LLC to hold their properties. If there’s ever a legal issue, the lawsuit hits the LLC, not you.
But be careful: you don’t want to put every property in an LLC.
- Primary residence? No—your name should be put into your revocable living trust for estate planning.
- Second home that’s also an Airbnb? Yes—consider an LLC for asset protection.If it generates income and has legal risk (e.g. tenants), it probably belongs in an LLC.
*See diagram below from KKOS Lawyers where we illustrate a strategic diagram organizing the three major areas of an entrepreneur’s tax and legal world.
Ask Yourself These 4 Questions
Still unsure whether you really need an LLC? Ask yourself these four questions:
- Do I need asset protection?
If there’s risk involved in what you’re doing—customers, clients, employees, tenants—you probably do. - Am I starting a company?
You’ll need an LLC to open a business account, to keep finances clean, to establish your company name and brand, and build legitimacy. - Do I have partners or investors?
Then you absolutely need an operating agreement (aka partnership agreement) to define roles and protect everyone involved. - Do I own rental property or other risk-based assets?
If it has liability exposure (e.g. tenants), it needs to be in an LLC.
If you answered yes to any of these, it’s time to consider forming an LLC.
Tax Considerations
When you set up an LLC you need to make tax elections. Doing this incorrectly will cost you greatly with the IRS. In general you should make the following S-Corp elections:
- Operating Businesses: If you sell goods or services at less than $50K per year – choose to be taxed as an S-Corp – See vid above for why
- Partnership: If you have a partner or more than 1 owner you’ll typically opt partnership
- Sole Proprietorship: If you have a rental or an operating business making less than $50K per year
Final Thoughts
LLCs aren’t one-size-fits-all—but they’re a smart move in the right situations.
At KKOS Lawyers, we’ve helped thousands of clients form, fix, and optimize their LLCs in all 50 states. Whether you’re starting something new or need to clean up an existing structure, we can help.
Contact KKOS Lawyers to Get Started
Key Takeaways
- LLCs protect your personal assets – If something goes wrong in the business, lawsuits stop at the LLC.
- A real company needs a real structure – An LLC adds legitimacy, helps you get financing, and separates business from personal finances.
- Partners and investors = operating agreement – Don’t run a business with others unless you have the terms spelled out.
- Rental properties should be in an LLC – It protects your other assets and keeps your real estate investments legally insulated.
- Ask the right questions – If you’re dealing with liability, growth, partnerships, or rental income, an LLC is likely the right call.
- LLC’s can be taxed differently – Choose the right tax election for your situation to minimize your tax liability
