I actually have three residential rentals. Each is treated as a business for income tax purposes. You report the business income and expenses on Schedule E, and you get to take depreciation for anything that is not your personal residence. The IRS is fine with you just declaring it a business of which your are the sole proprietor. I think doing this as an LLC would have exactly the same tax benefits. The main difference would be that the tenant would have to sue the LLC instead of you, if there was some liability issue. I think the LLC's only asset would be the apartment, so that's all they could get, I suppose the courts have figured out how to do that when a tenant wins. Maybe base the LLC's assets on the depreciated value at the time of the lawsuit? It might be easier to just buy an umbrella policy to buy you some protection beyond your homeowner's policy. We do that.
Is the window problem for structural or efficiency reasons? If efficiency, you night be able to keep them the same size with better glazing. If structural, with a steel header beam instead of wood.
