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Have you ever heard the phrase “It’s not what you make, it’s what you keep”?
When it comes to asset protection, this is the name of the game. There are thousands of “ambulance chasers” out there waiting for something to go wrong in a property that you own in order to take a bite out of your asset column.
Don’t let that happen!
If you are considering making a real estate investment, make sure you consult with your attorney in order to set up an entity to protect and separate your assets.
Here are some rules of thumb:
- Never invest in real estate in your own name
- Always use an entity, like an LLC, to protect your assets
- Always keep business and personal accounts separate and never “co-mingle” your funds
The most popular entity for real estate investment property is the LLC.
Here are some of the benefits of this useful entity:
- Flexible structure (as complicated or as simple as the owner wants)
- Simple automatic qualification for single layer taxation (An LLC can actually be taxed as a corporation by simply filing an election form with the IRS)
- Low-cost liability protection
- Pass-through tax structure whereby profits and losses pass through the business to the individuals who own it
- Ability to contribute capital, assets, or monetary investments to the partnership without restructuring the entity
Make sure you consult with your attorney before setting up an entity, as you need a structure that benefits your individual situation and complies with your state’s laws.