In real estate, it is not a one size fits all when it comes to business structure. There are LLCs, corporations, partnerships, joint ventures, trusts—so many different entities and legal implications with each type, you must consult with an attorney before jumping into creating your own entity.
For example, if you intend to buy and hold real estate for long term wealth, you may need a different entity than if you were to do a short-term deal like a fix and flip. If you intend to wholesale real estate and never really own any assets, you may need a different entity than if you had a monthly cash flow on properties. Again, an attorney and a CPA would be the best people to advise you on how to structure your business.
At any rate, the reason we have corporate structure is for asset protection and tax benefits. When you start owning assets and start receiving money from your investments, trust me, you want to protect it. Having the proper structure can help you with privacy, as well as in the event of a lawsuit, or even a death. Also, depending on how you’re structured and where your businesses are geographically located, you may have some major tax advantages just from having the proper entity that allows you to maximize what the tax law allows. Again, you would need a CPA to help with this, but it’s worth investing the time and money to understand your options as a real estate investor.
You could potentially end up with multiple entities in multiple states because each one serves a different purpose. If you go into this business, or any business for that matter, thinking you just need an LLC that you can go online and create, you may be missing out on some layers of protection and tax advantages. Having a qualified person to help you with this is essential to becoming a professional investor.
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