In this article, we’ll discuss the advantages incorporation has for your properties, taxes, and liability, as well as covering why many landlords choose to have separate business entity’s for each of their properties.
How to incorporate a property
Before continuing, it’s important to remember that incorporation is a big step. It’s one you should involve a lawyer in, just to make certain you’re doing everything you need to do to protect yourself and your business.
What you’ll want to do first is set up a corporation; LLCs are the most popular formation for landlords and property owners. We can help you incorporate, file your paperwork, and follow up with you and the state throughout the process. It’s actually a fairly quick process and, though it’s more costly than being a sole proprietor, incorporating can protect you from bankruptcy in the future if there are real problems with your property. Fees and wait times for incorporation do vary from state to state, but neither the cost nor the length of time between submitting your paperwork and becoming a business are overly large. You can visit our incorporation center for more details on how the process works.
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 corporation. This means the corporation “owns” your property now, even if you yourself might be the only member of the corporation. You’ll have a small amount of paperwork to do to keep up your new business in good standing with the state, but again, it’s a small obligation that carries massive benefits.
Advantages of incorporation
Once the above process is done, you’ll have a new business and that business will technically own and operate your property or properties. Here are the two main advantages to doing so:
Limited liability protection
If you haven’t incorporated as a business and something unfortunate happens to a tenant or visitor on your property, you could be held personally liable for it. And depending on how bad it is, you could find yourself in serious debt or, worse yet, bankrupt. Having a corporation means that your assets and your business assets are separated. That means that your business would be liable, as opposed to you personally.
Sometimes, just collecting rent on your property can put you into a tax bracket you’d rather be in. By having your business collect rent and paying yourself a salary out of that business, you can better control your tax payments. Furthermore, since you have a business now, you can write off all sorts of things, from purchasing a new refrigerator for a unit in your building to making repairs on the front door.
You don’t necessarily need to set up an incorporation in order to rent property, but it’s a great option for many landlords. You’ll protect your personal assets, your personal liability, and get some very important tax benefits in the process. And it’s quite easy to do. If you’d like to incorporate or get more information about how it works, visit our incorporation center or give us a call at (888) 627-1186. We’d be happy to help.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.