Creative Financing Avenues
Credit unions are member based organizations that you can join for free. Most credit ...
Learn moreReal estate is as lucrative as it is risky. If you’re thinking about getting into real estate investing, protecting your assets should be your first goal before you ever start acquiring properties.
Asset protection should take the form of establishing an LLC and creating a holding company. Holding companies are excellent ways to limit your liabilities and protect each of your assets while you grow your investments and your business.
The biggest risk when investing in real estate is the potential for your business losses affecting your personal finances. If you lose money on a property, you want to make sure you’ve protected yourself from personal loss. To do this, you’ll need to create a clear separation between your personal finances and the money you use for your real estate investments.
If you own multiple businesses, you’ll also want to make sure that your real estate investments are separated from your other business ventures. Keeping these funds clearly separate and defined, protects you from losing all assets in the case of a lawsuit or other financial setbacks. This is especially true if you own the building where your separate business is located.
Other real estate risks include:
To legally define your real estate investments from your personal funds and other business ventures, you’ll need to create a separate business entity known as an LLC. An LLC, or a limited liability corporation, is the most common business structure and the easiest to manage.
Your LLC will serve as the company name that collects income from any source associated with your real estate properties. As such, the name of your LLC should be separate from your other business ventures or otherwise uniquely defined.
When you apply for your LLC and choose your company name, you’ll also receive an EIN (employer identification number) that the IRS will use to track income and taxes. The next step is filing the necessary paperwork with your state office. If you have a business partner, this will be your chance to describe the roles, interests, and profit and loss management for each individual involved in your company.
Once you’ve secured your LLC, you’ve completed the first step in creating a real estate holding company. The LLC dictates the way in which your company will be structured.
A holding company quite literally holds the income, assets, and liabilities that you incur when you buy, sell, or manage properties. As a company, it will have a separate checking account that keeps operating funds and profits separate from your personal accounts.
When you purchase your first properties, collect rent, or handle any disputes, the holding company will be the entity performing those actions. The profits you make at the end of the year, however, will be yours.
Holding companies allow you to collect profits while legally protecting you from personal losses. Once your holding company is all set up, you can start acquiring properties with confidence. Whether you’re planning to flip properties, create housing rentals, or offer spaces to businesses, your ventures will be completed under the protection of the LLC and the holding company.
If you need to apply for financing or a loan, you’ll do so using the holding company, which means the bank or lending organization will examine the funds of the holding company instead of your personal funds. This also protects your personal credit from liabilities associated with applying for loans or potentially losing properties.
Once you have your property, your holding company will serve as the business entity that assumes liability in any and all legal matters. For example, if you own a business in addition to your holding company, any legal action taken against that business will be prohibited from impacting your real estate holding company in any way.
If you’re looking to invest in real estate, protecting your assets is key. Creating an LLC and holding company allows you to safely collect profits while protecting yourself from liabilities that could prevent you from growing your business opportunities.
Topics, that might interest you:
Credit unions are member based organizations that you can join for free. Most credit ...
Learn moreTax sale event may arise. But for you to really take advantage of these situations ...
Learn moreIf you are currently thinking about purchasing a new home, you no doubt have ...
Learn moreIf you’re behind on your house payments, you may be in danger of foreclosure. But ...
Learn moreShort sales by their very nature are not simple, but the more you know the better advantage ...
Learn moreFSBO refers to real estate which is listed for sale by the property owner instead of through a...
Learn moreMany home buyers prefer adjustable-rate mortgages because the initial interest rate is lower than a...
Learn moreThere are a lot of potential risks involved in property or real estate dealings. People who are ...
Learn moreIf you are a real estate owner, you know that your property is like a living being, and as such...
Learn moreSo you have decided to sell. In today’s real estate market you need all the help you can get in...
Learn moreWhy would one consider a “Smart Choice” (interest only) mortgage loan? Why not rent and save the funds?..
Learn moreA holding company (also referred to as a parent or umbrella company) is a company devised to house and manage..
Learn moreIf you own property, you’re likely looking for a simple, legally effective way to maintain your privacy and protect..
Learn moreA holding company is a company whose primary function is to acquire and manage other companies..
Learn moreReal estate is as lucrative as it is risky. If you’re thinking about getting into real estate..
Learn moreReal estate holding companies are the best way to protect your personal assets from the..
Learn moreLimited liability companies (LLCs) are business structures in the United State...
Learn moreA subsidiary company is a company that’s owned and controlled by another...
Learn moreThere are many parts that encompass forming a company and, in many cases...
Learn moreAlthough not a common idea when first starting your business, a holding company is something...
Learn moreHolding companies do not exist to create products or provide services.
Learn moreWhen forming a business in the United States there are a few options to choose...
Learn moreHolding companies are similar to other businesses, but instead of offering a product or service...
Learn moreWhen forming an LLC there are a variety of different aspects involved in the formation...
Learn moreHolding companies are business entities that are formed with the intent of owning another entity...
Learn moreIn everyday life, most people own a bank account to digitally use their money and protect it from theft...
Learn moreSeparate your business and personal funds, preserve your limited liability...
Learn moreWhether you choose to form an LLC or corporation, and no matter which state...
Learn moreDoes your business have a larger customer base? Is there an increased...
Learn moreFrom liability protection to a favorable pass-through tax status...
Learn moreThe way you choose to legally structure your business impacts...
Learn moreBoth LLCs and corporations are business entities...
Learn moreA Trust is a contract between the person who creates...
Learn moreIf you aren't a real estate investor, you may not be...
Learn more