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Know Your Incorporation Options

Even if you know how to invest in real estate, the legal intricacies of incorporation require a different type of knowledge. One of the simplest options for incorporation is an S-Corporation. Taxed under Subchapter S of Chapter 1 of the Internal Revenue Code, the corporation passes corporate income, losses, deductions, and credit through to shareholders, who report them on their own tax returns.

However, the corporation is considered a separate entity from yourself. As such, the company will be liable for any debts and damages incurred during business operations, protecting you and your personal assets. Of course, to actually benefit from this protection, you will have to transfer property to the corporation. If you remain the owner of the real estate, any claims or lawsuits will be directed against you. You will also have to abide by the strict regulations of corporate law.

Consider the Limited Liability Company Option

Due to the way corporations are regulated, forming a limited liability company (LLC) might be preferable. Compared to corporations, the regulations are less strict and allow for greater flexibility in defining the company. At the same time, the LLC remains a separate entity, conferring protection from liability.

The limited liability company is a good alternative if you want to focus on figuring out how to invest in real estate more effectively and retain flexibility. Before you commit, it's best to ask a lawyer what's best for your situation.

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.

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