Entity Choice for Real Estate Investors Presented

Transcript:Entity Choice for Real Estate Investors Presented:
Entity Choice for Real Estate Investors Presented by Alfonso Zambrano © 2017 Brown & Fortunato, P.C. Disclaimer The following presentation includes generalized information. Choosing an entity for your real estate investment or business will require you to make a choice depending on the specific facts of your situation. Contact your attorney and CPA to set up the best structure for your business. I am not a Tax Attorney, CPA or Financial Advisor. I am only licensed to practice law in Texas. Choice of Entity The greatest advantage to choosing a legal entity to set up your business is that you will not be personally liable for the debts and claims of the business. Choosing a legal entity will protect your personal assets. Real Estate is a “HOT” asset. Insurance is not always enough. LeBron James example. Types of Ownership Structures Sole Proprietorship General Partnership Limited Liability Partnership Limited Liability Company Corporation – “C” or “S” Sole Proprietorship Advantages Simple to create. No state filing required. Simple to manage. No mandatory meetings, you are the only person who can legally obligate the business. Disadvantages UNLIMITED personal liability. Ownership Restrictions: There can only be one sole proprietor. Automatic dissolution upon death or departure of the sole proprietor. Difficult to sell to a potential buyer because he or she may not want personal liability. Subject to self-employment taxes. Increased IRS examination risk. General Partnership Advantages Simple To Create. No state filing required. A partnership agreement is recommended, but not required. Meetings are not required. Flexibility in Management Structure. Any general partner can make management decisions. Disadvantages UNLIMITED liability of general partners. Subject to self-employment taxes. Limited Partnership (LP) Advantages Limited liability for limited partners. Centralized management. Any general partner can make management decisions. Disadvantages Unlimited liability for general partner(s). However, the general partner(s) of an LP can be a legal entity. Must file with state. Filing fees are $750. Must keep up with formalities in order to avoid piercing the corporate veil. Subject to self-employment taxes. Could be difficult to receive financing. Limited Liability Company (LLC) Advantages Limited liability of members. Flexibility in organizational and management structure. Can structure as member-managed or manager-managed. Texas allows single-member LLCs. Choice of taxation. Disadvantages Articles must be filed with the Secretary of State. Filing fees are $300. Certain records are required to be maintained. Must keep up with formalities in order to avoid piercing the corporate