If you are launching your real estate investment career, the way you structure your business entity is going to have a lot of impact on the company’s functioning, tax liabilities and many other important things. You can set up your real estate company as a sole proprietorship, a corporation or an LLC.
Most real estate investors prefer to incorporate as a limited liability company (LLC) for obvious reasons. An LLC shields you from personal liability and enhances your business’s credibility. The most important thing to keep in mind when you launch your real estate business is not to run your business in your own name. It will make your personal assets liable in case a lawsuit is filed against you.
While incorporating your business as an LLC seems like an obvious choice, many new real estate investors have a common question: Should they set up an LLC every time they buy real estate? Well, there are advantages and disadvantages associated with both the options. Below a few important considerations for you to make:
Why to set up an LLC for every new deal
Why not to set up an LLC every new deal
Your strategy will depend on your individual circumstances and approach to your business. If you don’t want to set up a new LLC every time you buy a new property, the better alternative is to keep all your properties under one LLC and take out an insurance policy that insures each of the assets individually.
Consult with a CPA to determine which type of a business entity will suit your individual circumstances.