I’ve heard from many people that holding real estate in a C or S corp is a bad idea, and that an LLC or sole p. w/ insurance are the best ways to hold real estate.
I have a few ideas why an LLC or SP is best…but I’d like to hear from others.
What do you guys think?
Thanks!
A lot depends upon what you are doing with this property you are holding. Tell us more about your investment strategy.
I’m still working on the plan. Probably SFH’s to start, from there who knows
I’ll hop in with my plan while ‘motivatedceo’ takes a moment.
My plan is to Sub2 SFH and offer them for sale with Owner Financing. I haven’t done this yet, it is in my plans for '07…
I want to set up the LLC but know there are specific things that need to be done to insure the proper tax and investment strategies…geeze, there is so much to learn, but this is where my focus is going to be for '07.
it’s generally not a good idea to hold property in your name. It’s like painting a target on your head. Property ownership carries with it some risk. Having the company own the property reduces the risk to your other personal assets. How’s that million dollar umbrella policy going to look when little Johnny slips on the loose board you didn’t repair? Grannie got $10 million for spilled coffee!
corporate stock is considered an investment. investments can be awarded to judgement creditors. so, when you rear-end Suzie in her Pinto, she sues you and you lose, she can be awarded your stock holdings, whether IBM or Motivatedceo corp. Now she owns the company that owns the property.
LLC membership is considered personal property by statute. As such it cannot be awarded in a judgement. Now the most Suzie can get is a charging order against LLC income, which is not in her best interest. You still control the company that owns the property.
Both the corporation and the LLC protect you personally from company liabilities, but only the LLC protects the company from your personal liabilities.
With regard to taxes, there is NO difference. LLC’s can be taxed as sole proprietorships, C-corp, S-corp or partnership, so you can have the benefit of whatever tax strategy benefits you most while maintaining the superior protection of the LLC.
That’s interesting to hear a CPA’s perspective on this subject - thanks for the feedback. Hey, you’re not in Dallas are you? I need a new accountant… =)
Flower Mound
Small world, Mark. Daughter-in-law’s parents live in Flower Mound.
cool. give me a shout if you’re ever in the neighborhood.