The most important aspect of a good tax and asset protection strategy is the entity you use for your various investments and businesses. Different investments and different businesses (and even different states) call for different entities. William, at the end of our last Ask Tom Live, tax edition, asks the following question.

Q: do i understand that you are saying that rental property should be in an LLC?

A: As a general rule, yes, LLC's work well for rental properties. In most states, they provide excellent asset protection and for tax purposes they are "flow-through" entities, meaning that the income is taxed to the owners, not to the entity. Some states have a separate tax or fee on LLC's, such as California, so it's not always the best entity. My recommendation always is to work with an experienced tax advisor to determine your tax and asset protection strategy as soon as possible.

Warmest regards,

Tom