Written by: Liam McLean; Law Clerk
If you own rental property, there is a good chance the deed is in your personal name. That is how most people start out—they buy a property, rent it out, and manage it themselves. But as your portfolio grows, so does your exposure. Every rental property you own creates a separate opportunity for someone to sue you. And when those properties are titled in your name, a single lawsuit can put everything you own at risk. Not just the property where the problem occurred, but also your home, your savings, and your retirement accounts. A Limited Liability Company (LLC) is one of the most effective tools available to address that risk.
What Is the Risk of Holding Property in Your Own Name?
When you hold rental property as an individual, there is no legal separation between you and the property. If a tenant or guest is injured on the premises, if a building code violation leads to a complaint, or if a discrimination claim is filed—even a frivolous one—the lawsuit names you personally. A judgment against you in that lawsuit can reach beyond the rental property itself and into your other assets. The more properties you own, the more exposure you carry, and the more attractive a target you become for plaintiffs’ attorneys looking at the full picture of what you own.
How Does an LLC Protect You?
An LLC creates a legal barrier between your rental properties and your personal assets. When property is held in an LLC, the debts and liabilities of the company belong to the company—not to you individually or personally. In Wisconsin, for example, the LLC statute expressly provides that a member is not personally liable for the debts, obligations, or other liabilities of the company solely by reason of being a member. Wis. Stat. § 183.0304. Most states have similar protections built into their LLC statutes.
This means that if a lawsuit arises out of one of your rental properties, the plaintiff can only reach the assets owned by the LLC—typically the rental properties themselves—rather than your personal residence, bank accounts, or retirement savings. The protection takes effect as soon as the properties are properly transferred into the LLC.
Do I Lose Control of My Properties?
No. Forming an LLC does not mean handing control to someone else. As the manager of the LLC, you retain full authority to make all decisions about the properties—collecting rent, handling repairs, managing tenants, and deciding when to buy or sell. The day-to-day operation of your rental business does not change. What changes is the legal structure that sits between your properties and your personal wealth.
What About Taxes?
One of the most common concerns about forming an LLC is the tax impact. In most cases, there is none. A single-member LLC is treated as a “disregarded entity” by the IRS, meaning rental income continues to flow through to your personal tax return exactly as it does now. A multi-member LLC is typically taxed as a partnership, with income passing through to each member’s individual return. Either way, forming an LLC generally does not create a new layer of taxation.
Why Don’t TOD Deeds Solve the Problem?
Transfer on Death (TOD) deeds are a popular estate planning tool, and for good reason—they allow property to pass to a named beneficiary at death without going through probate. But TOD deeds are a transfer mechanism, not a liability shield. While you are alive, the property remains titled in your name and remains fully exposed to creditor claims and lawsuits. A TOD deed does nothing to protect your personal assets from a judgment arising out of your rental property. If your primary concern is protecting yourself during your lifetime, a TOD deed is simply not the right tool.
The Estate Planning Advantage
Beyond liability protection, an LLC offers meaningful estate planning benefits. An LLC operating agreement can designate who takes over management if you pass away or become incapacitated. You can also transfer membership interests to your children or other family members gradually over time, giving you flexibility that a TOD deed—which only operates at death—cannot match. The result is a structure that protects you now and provides a clear, controlled path for ownership transition later.
Final Thoughts
Building a rental property portfolio takes years of effort. Protecting it should not be an afterthought. An LLC provides immediate liability protection, preserves your control over the properties, typically has no tax impact, and offers a flexible framework for passing ownership to the next generation. If you own rental property in your personal name and want to understand whether an LLC makes sense for your situation, consider reaching out to us at MWC Legal Group to talk through your options.
March 24, 2026
