Incorporating

Comments(6)

• 
  tanya121527th May, 2003

  If I were you, then I would get a business entity to hold my properties. Having a business entity gives more tax benefits than if you didn't. You are probably considered "self-employed", which they automatically place you in a sole proprietor division. You pay more taxes as a sole proprietor than you do as an LLC or corporation.
  
  Also, if you get sued, then any real estate in your name maybe used against you. If the real estate is owned by the company, then it will be less likely to be used in a lawsuit against you. You should consult both a real estate attorney and a CPA for advise on which business entity to choose. You may also want to seek a book on asset security or land trusts.
  
  Tanya

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  29th May, 2003

  Thanks Tanya!
  
  Someone told me it might be more difficult to obtain homeowners insurance if you are an investor. They also said they just increase their liability insurance to 1 million. any thoughts on those?

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  StacyKellams30th May, 2003

  Which entity to use depends a lot on where you live. You'll need to get state specific information from a good attorney in your state. You should also consult your accountant.
  
  This stuff can be debated back and forth till the end of time. However, I feel there is no "one perfect way" to do this stuff. It all depends on where you live, where you do business, how much business you do, what kind of business you do, who you do business with, and what you have before you start doing business.
  
  Also, I believe a lot of newbies spend way too much initial energy trying to figure out how to structure their entities and not enough time doing what's really important which is getting a few deals under their belt. The entities can be set up anytime. They don't HAVE to come first. I did my first 5 deals in my own name before I set up any entities.
  
  I like LLC's over C. Corps and S. Corps because of their ease of use. There are LOTS of requirements that Corps must comply with and if you don't do everything just right you leave yourself open to what's called "piercing the corporate veil." That's where a judge can "bust" open your Corp. because you weren't following all the requirements, leaving you exposed.
  
  There are always going to be "gotcha's" when you create an entity. That's because you set up these entities based on assumptions about the future that may or may not be accurate.
  
  It's a broad topic that could take a book to cover completely.
  
  Happy Investing,
  
  Stacy Kellams

• 
  vmginc1st June, 2003

  Please be very careful with what you set up as your structure in your business... To be perfectfly honest, the structure that you want is entirely dependent upon where you live, what amount of work do you want to put into it, etc. Another thing that you may want to check into is exit strategies if you ever want to sell your "company" to someone. Certain entities have certain restrictions.
  
  Please keep in mind also that different entities get taxed differently and at different rates.. In some states LLC's are great and in other states standard corporations are great.
  
  Also keep in mind that records must be kept and updated constantly on any entity. If you don't like paperwork, Beware. All in all, one of the biggest things to look into are the tax advantages/disadvantages and ownership rules/laws for different entities in the state that you live in.
  
  Good Luck and Good Investing!

• 
  18th June, 2003

  Thank you for the great advice...gave me a few things to think about too!

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  hrash19th June, 2003

  so which entity is the easiest to sell to another inevstor? I heard LLC, but is that true?