Should Real Estate Investors Form a Limited Liability Company

Should Real Estate Investors Form a Limited Liability Company?

Published On: January 4th, 2016Last Updated: January 4th, 2016Categories: Business, REIs

Everyone runs his or her real estate investment business differently, and what works for someone else may not work for you. It’s always a good idea to contact an attorney before you form a business – particularly if you’re working on your own and just starting out – because that way, you can get case-specific legal advice from a professional who understands the industry.

While this isn’t legal advice, and shouldn’t be taken as such, it’s a run-down of the most common types of businesses in the real estate investment industry: sole proprietorship and limited liability companies.

What is a Sole Proprietorship?

A sole proprietorship is a business entity that’s owned and run by one natural person. In this type of business model, there’s no legal distinction between the owner and the business.

If you own a sole proprietorship and someone sues you, or if your business owes money, your personal assets may be at risk because there’s no distinction between you and your business.

What is a Limited Liability Company?

A limited liability company, or LLC, is a business entity that combines the taxation of a sole proprietorship with the limited liability offered to corporations.

If you own an LLC, you’ll still report profits and losses on your personal income tax returns, but you’ll be protected from personal liability for business debts and claims. (If the business owes someone money or faces a lawsuit, only the assets of the business are at risk – not your personal assets.)

The Importance of Talking to an Attorney

Whether you choose to operate your real estate investment business as a limited liability company or as a sole proprietorship is up to you, but it’s nearly always a good idea to talk to an attorney who understands the laws surrounding the operation of businesses in Georgia.

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Call us at 404-814-1644 or get in touch with us online if you have questions. You can also apply online, learn more about the loan process or discover how a hard money loan can help you make your investments.