Regardless of where a business entity is located, real estate investors should keep their personal funds separate from those of their companies. There are two predominate forms for a holding company, the corporation and the Limited Liability Company or LLC. You should determine which form fits your needs, as the form you choose may affect your taxes and liability. Most small business owners choose to form an LLC holding company, as the corporation structure generally do not provide the same asset protection.

An LLC is a popular legal business entity because they are easy to create and provide the owner of the company with several benefits like liability protection and tax benefits. To maximize asset protection, you can form two LLCs, one holding and one operating company. You must create a separate entity for each, but the agent for each can be the same person – you. As long as you maintain the holding and operating companies as separate legal entities, the holding company will not be liable for debts of the operating company. There are advantages and disadvantages to creating a real estate holding company.

How do I transfer title of a property from a person to an LLC?

And, once you adopt the multiple-entity approach, you’ll need to balance the funding of these entities through both equity and debt, using leases, loans and liens. So, how can you protect all your assets from both business and personal creditors? Both objectives can be accomplished simultaneously through the proper funding and structuring of the business. Learn more about CT Corporation’s registered agentand formationservices. Real estate investment company enables investors to purchase properties in the U.S. and abroad.

These business entities, also known as “multimember” LLCs, are taxed similarly to partnerships. But at the same time, LLCs with several members also enjoy the benefits of flow-through taxation as this legal form provides for the transfer of profits or losses to its members. As a result, each respective business owner is responsible for filing tax returns on his or her share of profits and fulfilling fiscal obligations. Second, you will benefit from buying a house through a holding company as it will limit the investor’s personal liability.

Real Estate Holding Company?

For most purposes, you can consider the terms interchangeable. UpCounsel is an interactive online service that makes it faster and easier for businesses to find and hire legal help solely based on their preferences. We are not a law firm, do not provide any legal services, legal advice or “lawyer referral services” and do not provide real estate bookkeeping or participate in any legal representation. If you need help with forming an LLC holding company, you canpost your legal needon UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. The holding company can be protected from torts that occur as a result of the employees of the operating company.

The term affiliate is used to describe the relationship between two entities wherein one company owns less than a majority stake in the other’s stock. Double gearing is the practice of two separate entities using shared capital that may seem to mitigate risk but does not document actual risk exposure. Amanda Bellucco-Chatham is an editor, writer, and fact-checker with years of experience researching personal finance topics. Specialties include general financial planning, career development, lending, retirement, tax preparation, and credit.