As a real estate investor, you may be at risk if someone is injured on your property. A real estate holding company can address this issue.
What Is A Real Estate Holding Company?
Real estate holding companies or real estate LLC’s are designed to limit the personal exposure of a property investor to only anticipated risks and liabilities. This type of business organization also helps in simplifying taxes and accounting by isolating income from specific properties. That’s why many investors start their own real estate holding companies.
A real estate holding company is a legal entity that’s created to protect business owners from the risks of owning investment properties. Real estate holding companies, also known as limited liability companies (or LLCs), don’t participate operate businesses themselves; they just own different assets. Again, the purpose of a real estate holding company is to shield business owners from being personally responsible for debts or other liabilities incurred by the entity.
Real estate holding companies are just one way to protect your business, so you should consider creating one for your protection, along with other ideas after consulting with Love Law Firm.
Who Needs A Real Estate Holding Company?
A real estate holding company can be a great option for short-term and long-term investors. Just about any real estate investor can benefit from shielding his or her personal assets from business liabilities. It’s wise to separate your real estate income separate from your personal income. Holding companies can be fairly inexpensive to start, and the benefits outweigh the cost and maintenance.
There are a number of real estate investing areas that could really benefit from a real estate holding company. These include:
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First-time investors;
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Fix-and-flip investing;
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Passive income investors; and
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Those involved in commercial real estate.
Why Should I Form a Real Estate Holding Company?
Real estate investors can enjoy unique benefits and enhance the long-term health of their businesses by incorporating. Real estate holding company benefits include, but aren’t limited to:
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Protection of investors from personal liability;
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Pass-through taxation;
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The building of credit for your business.
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Protection for business owners from liabilities and debts incurred by their properties;
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Preventing double taxation on investment properties;
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Easier business management, including control of voting;
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LLCs typically pay less fees than corporations;
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Holding companies give investors added flexibility to distribute their profits;
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Simple registration requirements;
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Easy to expand;
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Allow investors to buy U.S. and foreign properties; and
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Allow for easy transfers.
Remember that sole proprietorships don’t enjoy all of these benefits; plus, they place your business and personal assets at risk. In addition, you’ll pay higher taxes.
Contact Us
Creating a real estate holding company may seem like a monumental undertaking for first-time business owners. It’s critical to starting your business, but that doesn’t mean you should shy away from finding the right people to help you achieve your objectives.
Creating a real estate holding company is usually not expensive, especially by an attorney who has experience in commercial transactions. The small amount spent upfront doing this can potentially save you thousands of dollars, as well as avoid a great deal of unnecessary stress later.
Contact LOVE LAW FIRM where we dedicate our practice to serving entrepreneurs, start-ups, and small businesses throughout New York.
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Francine E. Love is the Founder & Managing Attorney at LOVE LAW FIRM, PLLC which dedicates its practice to serving entrepreneurs, start-ups and small businesses. The opinions expressed are those of the author. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
