Posted by Joe(NoVA) on May 12, 2002 at 09:22:58:
You’ll disagree the first time a tenant “slips and falls” in one of your rentals, or when a laborer falls from a ladder and breaks his leg while fixing your rehab. Though you might have insurance that covers these eventualities, the insurance might not cover for some reason or other. Or a lawsuit might exceed the insurance amount. If that happens, would you rather be on the hook, or have a corporation take the hit?
Real Estate & Incorporation - Posted by tom bergan
Posted by tom bergan on May 11, 2002 at 22:50:14:
on john t. reed’s website he states categorically that ‘real estate investors generally do not incorporate…the disadvantages far outweigh the benefits.’ now, to the best of my knowledge, i agree with him. anyone care to comment?
Re: Real Estate & Incorporation - Posted by John - CA
Posted by John - CA on May 14, 2002 at 18:36:22:
I agree with both John and Joe. I would just like to add that the biggest reason people/investors have denounced corps is that it WAS difficult and expensive to get cash out of a corp. But with the advent of quasi-corp entities (LLC, LPs, etc) which John mentioned and the advent of S-corps, owners can now get cash out without any tax effects since income from these entities “flows through” to the owners.
Good luck,
John
Re: Real Estate & Incorporation - Posted by JHyre in Ohio
Posted by JHyre in Ohio on May 13, 2002 at 11:01:48:
I’m with Joe. Allow me to add a few points:
In his tax book, he talks about how expensive state fees are. That may be the case in CA, it is not the case in most other states. Admin fees (banks, accounting, etc.) are a factor and should be considered, but to categorically state that they outweigh the benefits is absurd.
Technically, “incorporation” refers to forming a corporation…most RE investors tend to use LLC’s and LP’s, particularly for buy and hold properties. His opinion on LLC’s appears to be the same as with corporations, but I thought I’d clarify, lest someone seek to split hairs.
Properly used, corporations and LP’s can save taxes, making the costs worthwhile without even considering the liability protection.
With that said, corporations, especially Nevada C-corporations, are oversold to RE investors. There ARE instances where using entities for RE is not worthwhile- but they are more the exception than the rule.
John Hyre