Mark J. Kohler, CPA and attorney, has helped millions of Americans improve their finances through practical, trustworthy tax and wealth strategies. Mark's mission is simple: deliver credible, actionable financial advice and guidance you can always rely on.
You’ve probably heard that forming an LLC is a smart move for protecting your business and assets. But did you know there are six main types of LLCs—and two bonus variations—that each serve very different purposes?
In this guide, we’ll break down exactly what those types are, who should use them, and how choosing the right LLC can mean the difference between real asset protection and costly mistakes.
Let’s unpack it.
1. Single-Member LLC for Rentals
Purpose: Asset Protection Tax Form: Schedule E
This is by far the most common LLC. Over 10 million of the 21 million LLCs in the U.S. are single-member, and most of them are for owning rental real estate. Why? Because when something goes wrong at your rental (say, a tenant slips and falls), the LLC helps isolate liability—keeping your personal assets out of the crossfire.
Rule of thumb: Set up one of these as soon as you close on a property. Bonus tip: You don’t need to worry about your mortgage due-on-sale clause—most banks allow the transfer to an LLC you fully own.
Equity Alert: If you’ve got more than $200K in equity across multiple properties, consider using separate LLCs to avoid putting all your eggs in one basket.
2. Single-Member LLC for Side Hustles
Purpose: Legitimacy & Protection Tax Form: Schedule C
Got a small business, consulting gig, or side hustle? This is your starting point. While there’s no special tax savings here, you gain legitimacy (for vendors, clients, and banks), asset protection, and the ability to scale responsibly.
But here’s the catch: Don’t mix your side hustle with rental properties in the same LLC. Keep them separate to avoid exposing your assets to risk from different types of activities.
Once your business nets over $50K/year, it’s time to convert your LLC to an S Corp. Why? Because you can potentially save thousands in self-employment taxes.
How it works: You pay yourself a “reasonable salary” (which is subject to employment taxes), but profits beyond that come to you as distributions—not subject to self-employment tax. We’ve helped thousands of clients save $8K+ per year this way.
If you’re making over $50K in profit, call your mom to celebrate… then call us to convert to an S Corp.
4. Multi-Member LLC (Partnership LLC)
Purpose: Joint Ownership Tax Form: 1065
This LLC type comes into play when you’re partnering up—whether it’s with your spouse, your trust, another person, or even your own S corporation.
Two common variations:
Rental partnerships: For co-owning real estate without triggering self-employment taxes.
Operating partnerships: For businesses with partners, often owned by individual S Corps for tax efficiency.
Partnership LLCs offer flexibility, but they also come with complexity. That’s why proper structure and guidance are essential.
5. Series LLC
Purpose: Enhanced Real Estate Protection Tax Form: Schedule E or 1065
Have multiple rental properties in one state? A Series LLC could be a game-changer.
With a Series LLC, you form one master LLC, then create “sub-series” underneath it—each with its own liability protection, without the hassle or cost of forming multiple LLCs.
Ideal for: Real estate investors with 3+ properties in states like TX, UT, NV, IL, and VA.
Not ideal if your properties are scattered across states that don’t recognize series structures.
Purpose: Advanced Asset Protection Tax Form: Depends on structure
The COPE LLC is built to protect your assets from your liabilities (the opposite of most LLC structures). This becomes important if you’re sued personally—say, from a car accident or personal lawsuit.
Wyoming is the gold standard for COPE laws. If your net worth is $1M+, this is a must-consider strategy. It’s complex, but crucial for high-net-worth individuals.
Bonus: Special Purpose LLCs
7. IRA-Owned LLC (IRA LLC or “Checkbook Control” LLC)
Purpose: Self-Directed Investing with Your IRA Set up correctly, your IRA can own an LLC—giving you direct control over investments like real estate, private companies, and more. Ideal for experienced self-directed IRA investors who need speed and flexibility.
8. PLLC (Professional Limited Liability Company)
Purpose: For Licensed Professionals Doctors, dentists, lawyers, architects—this one’s for you. Many states require licensed professionals to form a PLLC rather than a traditional LLC. Be sure to check your state’s laws or talk with a lawyer before filing anything online.
Final Thoughts: Don’t DIY Your LLC
Whether you’re just starting or have multiple ventures and investments, your entity structure matters. A lot. The wrong setup could cost you thousands in taxes—or worse, leave you exposed to liability.
The more organized you are, the more successful you are.
If you’re unsure what type of LLC is right for you—or whether you’re overdue for a restructuring—schedule a consult with our legal team at KKOS Lawyers. We’ll walk you through the Trifecta strategy and build a plan tailored to your business and goals.
Also, if you’re setting an LLC, you’re going to want to do all you can to protect your personal info as well, preferably through a Registered Agent.
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Mark J. Kohler, CPA and attorney, has helped millions of Americans improve their finances through practical, trustworthy tax and wealth strategies. Mark's mission is simple: deliver credible, actionable financial advice and guidance you can always rely on.
