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Even though our nation’s economy is floundering, there are many potentials out there for the savvy investor.  Many investors with ready funds have turned to taking advantage of the depressed real estate market.  As many homes and commercial buildings are going through forced sales due to foreclosure, investors with cash-in-hand are able to buy many of these properties at a discounted rate.  In order to protect and shelter that investment (as well as the investor’s other assets), however, one should consider shifting the recently purchased property to a newly formed business entity.

Why go through all of the hassle and extra cost?  Business formation and continued operation as a business will shield an investor from most personal liability for negligent acts and omissions tied to that particular property.  For example, if you own land that is residential real estate worth $50,000, and someone incurs injuries on your property in the amount of $100,000, without proper business formation, an individual could go after you in court for your personal assets for the entire $100,000, not just the property valued at $50,000.

Also, another added benefit of business formation and operation is that costs incurred through your activities for the business entity yield significant tax benefits.  If a parcel of property is held as an investment for at least a year and one day, the land is then considered a capital investment.  When sold, a capital investment is sold at a lower tax rate than ordinary income.  Additionally, having a business entity makes more accessible certain business deductions not otherwise available to casual investors of property.  All of these advantages would greatly outweigh the initial planning costs involved with hiring a skilled attorney.

To make the most of these and many other benefits, one should consult an attorney to determine how best to establish your real estate investment business entities.  The attorneys of Larsen & Teusink PC have extensive knowledge of tax and business law to best protect you from law suits and tax liability.  Contact one of our professionals today to schedule an appointment.  678.553.2923.

Posted under Business Law, Commercial Real Estate, Planning Law, Property Law, Real Estate Law, Tax Law, Tax Planning

The twenty year building boom in Metropolitan Atlanta has left the city with a glut of retail and commercial office space.  This has driven down rental rates in submarkets throughout the city.  It has also caused landlords to offer massive incentives to potential new tenants.  At the same time, the economy has put pressure on businesses of all sizes.  Many businesses are struggling to make rental payments that only a few years ago seemed competitive.

Some small businesses will choose to simply walk away from their lease obligations.  Taking this step without consulting with an attorney could devestate your business.  Worse, in some situations, a landlord may have the option to come after your personal assets.

In Georgia, a residential landlord is required to mitigate damages when a tenant breaks their lease.  This means that the landlord must actively seek a new tenant to replace the one that left.  The tenant who defaults on their lease will only be obligated to pay for those months where the landlord was unable to find a new tenant.

Commercial landlords in Georgia have no duty to mitigate.  Thus, a commercial landlord can simply allow a property to remain vacant until the end of the lease term and sue the tenant for the unpaid rent.  Further, almost all commercial leases we review have acceleration clauses that allow the landlord, upon breach of the lease, to immediately bring suit for all of the future unpaid rent.  Typically, these leases will also have clauses allowing for the payment of interest and the landlord’s legal fees.

If you are thinking about breaching a lease, we suggest that you hire an attorney to negotiate a release with your landlord.  Litigation is expensive, and most landlords will seek to avoid it if possible.

Larsen & Teusink, PC represents both landlords and tenants in all matters related to commercial leases.  This includes negotiation, drafting, analysis, and litigation.  If you have questions or concerns related to a commercial lease matter, please visit our website or call us at 678.553.2923.

Posted under Business Law, Landlord Tenant, Real Estate Law