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LLC vs. Sole Proprietorship for Rental Owners

By PropsManager Team | Dec 17, 2025

LLC vs. Sole Proprietorship for Rental Owners

Sole Proprietorship

  • What is it? You own the property in your own name.
  • Pros: Simple. No setup fees. Easy taxes (Schedule E).
  • Cons: Unlimited personal liability. If you get sued, they can take your personal savings.

LLC (Limited Liability Company)

  • What is it? A separate legal entity owns the property.
  • Pros: Liability protection. Professional appearance.
  • Cons: Setup fees ($50-$800 depending on state). Annual franchise taxes (e.g., $800/year in California). Slightly more complex financing (commercial loans).

The Verdict

For most landlords, the liability protection of an LLC is worth the cost. However, if you have just one property and great insurance, a Sole Prop might be acceptable to start.

Conclusion

PropsManager works with both. You can set up your entity profile to match your legal structure.