LLC

LLC — A limited liability company combines the liability protection of a corporation with the tax flexibility of a partnership. Note investors commonly hold assets inside one or more LLCs so that a legal dispute involving a particular loan does not put personal savings, a primary residence, or other unrelated investments at risk.

Many note buyers create a dedicated LLC before purchasing their first asset, and some use multiple LLCs to segregate pools of notes by risk profile or geography. State filing requirements, annual fees, and operating-agreement terms vary, so investors typically consult an attorney to choose the right jurisdiction and structure. An LLC also simplifies the transfer of note interests to partners or heirs and can provide a cleaner paper trail when dealing with servicers and title companies.