Have you been considering incorporating? Like many business owners, you’ve probably thought about it. And why not? After all, as a landlord, you have clients, or I should say tenants, and you are providing a service. Incorporating your business has plenty of benefits, but first take a look at the definition of incorporation.
What is an incorporation?
Incorporation creates a legal entity around your business. It separates your personal income and assets from your rental property income and assets. By incorporating, you also protect yourself in the event the business encounters legal trouble or incurs any debt.
If you are thinking about incorporating your business, start by asking a lawyer. They can help you make sure that you’re doing everything that is needed in order to protect yourself and your business.
Are you still on the fence about incorporating? Let’s take a look at the pros.
Limited Liability protection – If you failed to incorporate and something happened to a visitor or a tenant on your property, you, as the business owner would be held personally liable. This could lead to incurring a lot of debt or even worse —bankruptcy. As previously stated, by incorporating your business, your personal assets are treated separately from those of your business. This means the corporation will be held liable and not you personally.
Taxes – Collecting rent on your property means an additional source of income on your taxes, and this can place you in a higher tax bracket. When you incorporate this separate your personal income from your business income. Also, you get the added perks of you having the option of business tax deductions, including business expenses and medical insurance. So if you need to install that new stove or fix a leaky pipe you can write it off as a business expense.
Are you ready to incorporate? Here is how.
LLCs are the most popular choice of entity formation for landlords. At Rocket Lawyer we can help you incorporate, file your paperwork, and follow up with you and the state throughout the process. It’s actually a relatively quick process. Although,fees and wait times for incorporation do vary from state to state.
Once you have a legal business in the eyes of the state, next, you’ll transfer the title of your property or properties to the legal entity. This means the legal entity “owns” your property now, even if you yourself might be the only member of the entity. You’ll have a small amount of paperwork to keep your new company in good standing—a small task with massive benefits.
Incorporating a rental property businesses can be very beneficial to landlords, although it’s not a requirement. By incorporating you protect your personal assets, and income with the added bonus of tax benefits in the process. If you’d like to incorporate or get more information about how it works, Please check out our incorporation center.