Making investments in SMB deals - benefits to setting up LLC?

November 20, 2025

by an investor from Columbia University - Columbia Business School in Seattle, WA, USA

I started dabbling in investing in SMB deals. Invested in two deals so far ($50K, $100K) and very much enjoy interacting with the searchers and learning about different businesses. I plan to do more, but I'm wondering if there's any benefit in setting up LLC and essentially running this as an investment business (I do have a corporate gig as a day job). So far, I've been just investing out of my personal account. I wanted to ask around here for first hand experience before reaching out to an accountant. Thanks!

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Reply by a professional
from Villanova University in West Chester, PA, USA

Hi, Having an LLC can offer several benefits including liability protection, more distinct separation between personal and investment activities, and act as a consistent record keeping tactic. It can also have tax benefits as well depending on your overall tax liability and planning. It will depend on how often you plan to invest and your tax planning strategy. If you would like to further discuss this matter, I would be happy to help. If you’d like to schedule a complimentary consultation, you can use this link to help me prepare for the call and it will provide my availability so that you can schedule a time that works best for you. https://www.deanstreetlaw.com/ma-potential-client-questionnaire

Reply by an investor
from Stanford University in Bellevue, WA, USA

I've invested both personally and through an LLC. I don't think you will gain much by doing your deals via an LLC. If you are a passive investor in these deals, the LLC doesn't provide much additional protection. You are pretty much protected unless you sign a personal guarantee or commit fraud or something on that level. And investment expenses aren't tax deductible unless the LLC is a real business or you are a trader / RIA, etc. This changed back in 2018. So no real benefit yet you have to keep a separate set of books, potentially file extra tax returns and have the cost to set up and maintain the entity.

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