“Own Nothing, Control Everything” John D Rockefeller

An LLC actually combines aspects of partnerships and corporations, so an LLC is less formal and more flexible than a typical corporation, yet offers protection as well as certain advantages that are much the same. For example, members cannot be found personally liable for company debts. Their assets are separate from the assets of the LLC so they cannot be seized. One of the advantages of an LLC is that taxation is based on the partnership model. Flow-through taxation is advantageous since members are only required to pay taxes on their earnings once instead of paying both corporate and individual taxes.

There are several benefits of running your real estate investing business with an LLC. The first benefit is protection. Make sure that you contact an attorney or tax professional. I use an LLC in my business and know several big time investors who also use them.

An LLC, unlike a sole proprietorship or partnership, provides bullet proof asset, privacy and identity protection. Every person who owns rental properties should have them protected with LLC’s. This way if something does happen you are protected and they cannot go after any of your other assets.

Another reason is tax savings. An LLC allows business owners to keep more of what they make with access to hundreds of legal tax credits. An LLC gives a small business the appearance of a large credible and established company. It is important to establish yourself and your business as a brand. This way people who hear a company like Big Sky Property Solutions LLC know what you do and how amazing you are.

The last is building business credit. An LLC has the ability to establish a separate, more powerful credit profile than an individual. The benefits of building business credit are access to capital. You can obtain cash, credit, platinum cards, auto and equipment leases without a personal guarantee. You can also build a business credit profile under the business name, completely separate from the individual owners’ personal credit profiles. It also greatly increases your ability to obtain credit, leases, and government contracts with a verifiable business credit profile. Achieve peace of mind by having access to capital to ensure that the business can grow and prosper.

I hope this article gave you some great information about why every real estate investor should be using LLC’s.

By Christopher Seder

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Real Estate Investing and its Benefits

At present, the number of real estate investors continues to rise continually because many individuals today realized the high earning potential of real estate investing. Real estate properties have very attractive qualities that ensure viable income opportunities. If you want to enjoy the many benefits of real estate investing, start choosing your investments now.

If you have established long term goals, then you should invest on a certain scale over the long term. For instance, you purchase a real estate property. You need to hold it for a few years so that the home equity is built until it becomes a good or excellent deal. Homeowners benefit a lot from equity because when equity is high, the net worth is also high. Many real estate investors prefer to invest over the long term for this reason.

By purchasing a real estate property, you will also enjoy the tax advantages that come along with it since you now own your investment property. Tax advantages vary depending on the property you purchase. Before engaging in any transaction, you should look into the possible advantages that you can get. Compare various properties and choose the ones that have the highest tax advantages.

Some investors tend to purchase properties and then resell them for a higher price. This type of investment promises high returns. You should consider the time of the purchase and the market condition. Check for the profit margin once you decide to sell the property. There are several factors that you need to consider before you purchase a certain property such as current property sales, upkeep, and renovations.

Can you hold the property for a short period? You should always be prepared because there are times when you can’t easily sold the property you’ve bought. After looking into these factors, you can now determine if a certain property is profitable or not. If the property can be sold quickly, then you will enjoy the benefits that come along with it.

There are real estate investors that become landlords. Some investors purchase properties but they don’t resell them; instead, they lease the property. If the property comes with a mortgage, the investor will need to pay for it but he or she will also receive additional incomes from the rents.

So you see, there are a lot of benefits if you decide to enter the real estate business. To summarize, the benefits are – build equity on the property, tax advantages, high return from reselling properties, and earn additional income by leasing properties.

It doesn’t really matter if you have short term or long term goals. The earning opportunities in real estate investing are really attractive. It’s no wonder why many people are now into the real estate business. If you want to enjoy the same benefits, try to determine if this is the right thing for you. You need to be interested in the purchase of real estate and you need to have adequate capital. To generate capital, you can take advantage of grants provided by governments or you can get capital in other ways.

You should also be familiar with the basics and foundation of real estate investment. Put all these things together and you’re ready to become an investor. Decide where you want to focus and establish your goals. By doing so, you can experience the same benefits enjoyed by other investors.

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The LLC and Tax Benefits

The LLC and Tax Benefits

The LLC (Limited Liability Company) can play an essential role in protecting your personal assets in the unfortunate scenario where the property is sued. Other business structures — namely the C Corporation and S Corporation — do offer the same asset protection benefits. However, the LLC brings some unique tax advantages that make it the preferred business structure for real estate investors and builders.

The C Corporation and the problem of double taxation

In the eyes of the IRS, the C Corporation is a separate entity. The Corporation is taxed, and any money paid out to the owners in the form of a dividend is taxed again on their personal income statements. This is commonly referred to as “double taxation” and can make owning a corporation very expensive to the small business owner.

The LLC (as well as the S Corporation) eliminates this double taxation penalty. The LLC is considered a pass-through entity. It does not file separate taxes; rather, any business income or loss is reported on each individual owner’s tax return. In the case of a single member LLC, the LLC taxes would be filed under the individual member’s tax return; in the case of a multi-member LLC, the LLC would generally file a partnership tax return.

All LLC profits flow through to the owners and are taxed at the personal income rate – which depending on circumstances can be lower than what Corporations pay (of course, you should always check with your CPA or tax advisor regarding your specific situation…).

The LLC and Losses

The IRS also allows any loss of the LLC to pass through to individuals. This loss can offset other sources of income – in effect, reducing your overall tax liability. And as an added bonus, in an LLC, members are allowed to add the amount of the mortgage to their basis for the purpose of computing a loss. For the S Corporation, this is not the case.

Let’s say you invested $10 in ABC property. Your tax basis is $10. You mortgage the real estate and borrow $20. Rental income and values decline leaving your property with a $20 loss at the end of year one. Simply stated, you’ve lost $20 through investment activities in ABC property.

If you had created an S Corporation, the IRS will only allow you to take a $10 loss on your personal income tax (because the tax basis is $10); the remaining $10 loss will be deferred. But with an LLC, you’re allowed to deduct the entire $20 in the first year.

Again, it’s always wise to consult with your personal tax advisor, but generally speaking, most real estate investors choose the LLC for their investment properties.

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