Most San Fernando Valley Property Management Companies say, when getting into the real estate field, at one point you’ll have to clearly understand all legal issues associated. In addition, you have to learn these laws in order to protect your assets.
Structuring Your Business As A San Fernando Property Management Company
San Fernando Valley Property Management Companies say you have to make an important choice regarding the legal structure of your real estate business. This is more commonly known as an LLC.
LLC means limited liability company, better known as a newer form of business entity that can offer benefits that certain partnerships and corporations cannot guarantee. What it really means, it was developed to protect real estate investors from themselves and the malicious intent of others.
It may seem like an fearful topic when you’re just starting off. Usually, individuals feel this way because it’s the foundation upon which your entire real estate company will be built open.
Knowing LLC As A San Fernando Valley Property Manager
San Fernando Valley Property Manager’s will often tell you that limited liability companies are entities that you can either be the only owner or own partially.
The reason you’re forming a real estate LLC is to draw a line between your personal and business assets. Just in case you do run into any legal or financial trouble, no one can seize your personal assets to pay off any debts you may owe. And, it goes the other way around as well. It’s not that simple to use the assets listed under the LLC for your own personal either.
An LLC is setup to prove that your business is not just used as a vehicle to hold your personal assets, rather, it’s used to conduct business. To prove your LLC for business use, there are certain things needed to establish this such as, for either instance or filing your tax returns.
When An LLC Is Needed As A San Fernando Valley Property Manager
San Fernando Valley Property Management Companies will often tell you that there are a few reasons why every real estate investor should consider setting up an LLC. Be sure to limit your personal liability as well.
Typically, there is a lot of money involved in every deal, the amount needed is often more than the average individual can cover.
Investors have to keep in mind, to make sure your personal finances are protected. Be sure that your finances are not tied to your business when it comes to this matter. What might happen is a lawsuit could wipe your accounts and personal assets as well.
The incredible part about having an LLC, is that it limits personal vulnerability to potential lawsuits that are related to any respective property. When real estate businesses are under an LLC, if you were to get sued, your personal finances, personal residence, and other personal assets are not at risk.
What Is Pass Through Taxation
San Fernando Valley Property Managers will tell you that as tax season approaches for businesses, a handful of corporation owners pay a double tax. Required by law, they have to file both their business income and personal income tax statements together.
When you have an LLC, you don’t have to do that, it excludes you from paying taxes at a business level. This is because of pass through taxation.
Tracing back to a 1988 revenue ruling that allowed real estate investors to avoid double taxation by holding property through an LLC.
Pass through taxation allowed any real estate LLC member to report business profits or losses. The process was done through a lower rate by individual tax returns.
Now if you’re a single member LLC, you enjoy even more deductions because you’re able to use, your mortgage interest as a deduction.
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