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
This post was written by Todd Larsen on July 2, 2010
