I will like to find out how can I use my company (a corporation) to invest ini real estate properties. I want to have the company make the purchase, company on the grand deed, secure the loan and receive a rental income. How do I go about this? Do I need to establish a new corporation? Is there taxes issue that I need to consider?
How to use a company to invest in Real Estate properties? ?
23
Mar
Sharon T
March 23, 2010 at 3:11 pm
Is your corporation a C or an S? An LLC might be the best choice for holding real estate.
Yes, there are tax issues. Consult a good attorney and tax accountant.
doinou
March 23, 2010 at 3:52 pm
Incorporating real estate is going to be double taxation.
satarnag01
March 23, 2010 at 4:22 pm
depending on what you are doing, a S-corp or an LLC will do. You will need to consult your accountant on the tax issues. Both the LLC or S-corp will protect you from legal issues.
As long as your corporation has credit, you can use it to purchase property. You get credit by applying for it at your bank.
You could also purchase it yourself, transfer it to a trust and then transfer the trust to the LLC or S-Corp. Then remove yourself from the credit bureas (sp? Equifax, trans union). You can also purchase corporations that have a line of credit and then use those corporations to purchase the properties.
Isn’t America great?
Good luck
radar66720
March 23, 2010 at 4:51 pm
What kind of business does your company presently conduct? You may not want to hold property in a company that let’s say, wholesales prescription drugs or sells liquour.
You want to isolate that liability or from your primary source of income or where you have personal property of value, like a bank or investment account or other assets that would induce a law suite because they feel you could satisfy the debt if they win.
I attended a symposium on protecting yourself from law suits. The attornys suggested that you have a limitted partnership hold the property, with a corporation as the primary partner and yourself as the limited partner.
The gist of it was that you cannot seize property from limited partnerships to satisfy a law suit and can only claim money that would be distributed to the limited partners. The point being that if the partnership earns money, but doesn’t distribute it to the partners, the creditor (winner of the law suit) still has to pay income taxes on the money earned, though they never got any of it. The upshot being, they will settle out of court and usually for the insurance amount.
This seems a little extreme for a single house or even a handful of them. If you insist on holding a property in a corporation of some sort, an LLC would be ideal, but keep in mind that the corporation has a limited life span of 20 years. LLCs were intended to be a step on the way to a C corp for beginning businesses.
You can choose to set up the LLC or S corp to “pass through” the earnings and have them taxed as personal income. C corps have a double taxation, but are better tax deductions for active companies. You can provide your health insurance through the company, and have it totally tax deductible for the corporation. You can also have corporation meetings in let’s say . . . Hawaii or any place else. Not unusual for businesses.
Still a C corp is extreme for a beginning real estate investor.
There are some online places that will help you create a LLC or S corp. One I’ve heard about is Legal Zoom.
I am not connected with them and have never used them. Just making a suggestion on where to search.
You can always contact a lawyer to do the work as well.
BTW, I own several houses, and they are all in my name. I wouldn’t get too exercised about setting up a company till you are sure real estate is where you want to go. You can have a house or two in your name without a lot of risk, if you don’t advertize to everyone what you own.