What is entity formation?
Entity formation is the creation of a new limited liability company (LLC), partnership, limited partnership, or corporation. With that being said, entity formation is more than completing paperwork. It is a detailed discussion regarding the business and the property entity structure that should be used. It is also a discussion of what formalities need to be followed to ensure the owners are shielded from personal liability.
RELATED TO ENTITY FORMATION?
Should I form an LLC for each of my investment properties?
This is the number one legal question from real estate investors, and unfortunately, the answer is a “lawyer answer” — it depends. The formation of an LLC is one aspect of a personal protection plan that also includes having sufficient insurance and engaging in proper business practices. The most conservative approach is to form an entity for each property, but this is often not necessary. Moreover, if the formation of too many entities causes the business owner to co-mingle money or otherwise not honor the entity structure, he or she may lose the entity protections thus nullifying the protection from extra entities. This is why it is important to craft a plan based on the investment strategy and characteristics of the investor his or herself that is custom for each situation.
Can I just complete the paperwork online to form my business?
Yes. The paperwork is very easy and does not require an attorney. You should not hire an attorney to complete this paperwork. Instead, you should hire an attorney to have a discussion regarding your business and the proper entity structure, as well as to discuss what needs to be done to ensure you receive the protection that is desired when forming an LLC or corporation.
Will you advise about the tax benefits of different entity structures?
I will provide general advice and guidance regarding the tax benefits of various business structures, but to provide a full answer to these questions we would need to know your entire financial situation. This is one of the reasons we recommend that all business owners have an experienced accountant as part of thier team. If you need assistance finding a qualified accountant for your business, please visit the referrals page on this website.