There is nothing more terrifying when you are starting your own business than the thought of suddenly losing your assets and having to start all over again from scratch. To protect your assets when you enter the field of real estate investing you need to make sure that you design your business with the right tools from the start. The following is a list of different types of entities that are available to you as a business owner to design your business for tax purposes.
LLC- This type of setup is ideal for real estate investors when dealing with rentals and lease option properties. This type of entity is generally the cheapest and easiest to run with its tax perks and opportunities, by far the most flexible for your needs.
S-Corp- This type of setup is ideal for those real estate investors who are hoping to “Flip” properties to make the bulk of their income. With special tax-exempt status and freedom from double taxation you can make a bundle of money with easy turnaround on your properties.
C-Corp- This type of setup is great for someone who is trying real estate investing as a solid full-time daily job without having any medical or retirement plan in their future. With a C-Corp you can get access to medical plans or retirement plans on a tax-free basis to help you get your business off of the ground.
There are obviously some other choices for real estate investors, but some vary from state to state so it is worth it to you to educate yourself on the merits of different entities. Do not settle on one before you have decided which way you want your business to go, a real estate investing renter will want a different setup than the real estate investing “flipper”. It is imperative that you know what will work for you and continue to do that throughout the process. If you desire to get into different types of real estate investing, open different entities to take care of each.
