What's the best entity to hold real estate?
Choosing the best entity to hold real estate investments is typically dependent on the particular circumstances involved, such as the size and nature of the company's business, and number of owners or members and their respective rights and obligations. If the LLC is formed and managed correctly, customers can limit their potential liability if there is a claim or lawsuit relating to the real estate. We find that many of our customers use an LLC to hold their real estate in order to protect their other assets and property from claims that might result from their real estate investment. Although an LLC and a corporation can both help protect our customers from liability, we find that many of our customers choose an LLC to hold real estate. An LLC offers investors more freedom in how they can manage their investment, and may not require some of the formalities usually required with a corporation, such as annual meetings of stockholders. In addition, an LLC can have tax advantages over a corporation. For example, an LLC with only one owner may not have to file a separate tax return and its profit or loss can be included on the owner's tax filing. In contrast, a corporation must file a separate tax return.
Summary:
- Selecting the best entity to hold real estate investments is typically dependent on the particular circumstances involved, such as the size of the company's business, and the number of owners or members.
- Many of our customers find that an LLC provides them with a simpler and more flexible way to protect their assets from claims that might result from their real estate investment.
- An LLC may have tax advantages over a corporation. For example, an LLC with one owner may not to have file a separate tax return and its profit or loss can be included in the owner's personal tax return. A corporation must file separate returns.
Estate planning
The late Sam Walton, of Wal-Mart store fame, placed his business assets in a closely held family corporation giving each one of his four children 20% of the stock. He and his wife together owned the remaining 20%. The family's corporation became worth billions of dollars but upon Mr. Walton's death there was no estate tax due! Why? Since the company was owned by his children and his wife. And a surviving spouse does not pay taxes on the estate so Mrs. Walton was also able to avoid paying estate taxes on her portion of the assets. This saved the Walton's billions of dollars in taxes, all by using simple corporate tax strategies. The Walton's net worth today is over 100 billion dollars, but without the advance estate planning that Sam Walton did their net worth could very well be worth just a fraction of that. It is very important to plan in advance, so that your loved ones can avoid having to sell most of the estates assets to pay the taxes on it. |
