I've routinely seen where folks put a rental into an LLC, yet they either do not transfer title of the property to the LLC, or they discover after the fact that the lender will not allow it. If they don't transfer the title, then the LLC has no assets - thus there's nothing to "protect" with the LLC. On top of that, it still does not change the fact that the tax reporting does not change, as it's still reported on SCH E - not SCH C.
Additionally, in some states (Florida being one) it's extremely easy for a claimant to legally circumvent the LLC protection.
For "real" protection, an S-Corp should be formed "after" you have the lender's permission to transfer title to the S-Corp (in writing of course). By going that route, it's also possible to set things up as a IRA too, thus building a retirement nest egg faster than any other investment could ever hope to legally. But if you go the IRA route, consult with an attorney and have them set that up for you. They'll charge a few grand. But in the long run it will be worth it. If you try doing it yourself and make even one teeny tiny mistake, the IRS won't catch it (quite conveniently for them) until you reach retirement age. Then the fines and penalties could easily wipe out any hopes of retirement.
