Real Estate Wholesaling: The Benefits of Incorporating
Despite there being so many arguments for forming a legal entity for real estate wholesaling and many real benefits why do some investors still continue to attempt going without it?
Forming a corporation, LLC or other form of legal partnership isn’t just full of benefits for wholesaling homes, it’s one of the first and most basic steps for any entrepreneur or new business. So what holds aspiring real estate investors back from this smart first step?
Few can argue that they haven’t been recommended to do this, so it isn’t lack of knowledge. Some may simply confused and overwhelmed by the different choices they have or don’t know where to start. Some may just think that they can get away without it. However, the excuse given by most is that they are trying to save on the cost.
Funnily enough for all the wholesaling benefits getting organized in this way offers it is actually one of the fastest and simplest parts of getting going in any form of real estate investing or business. For most investors it is simply a matter of hopping on the web. In most states and even in other countries today an LLC, corporation or the foreign equivalent can be created and filed in a matter of minutes via a mobile device. While some more exotic locales may be more expensive to file in, in most U.S. states the cost is barely over $100. Of course some and especially those with partners will be wise to consult an attorney or professional incorporation service to assist them, but it quickly becomes second nature and experienced pros file them themselves all the time.
Besides staying organized, keeping things official, saving confusion and arguments with partners later, boosting credibility with prospects, investors and vendors or even obtaining access to additional funding via business credit the biggest advantage of incorporating has to be the financial savings it provides.
Without crossing the line into providing tax advice as everyone’s circumstances are different; operating and flipping houses through a legal entity often provides an additional layer of protection from taxes or at least deductions.
Then, perhaps most significantly of the wholesaling benefits is liability and asset protection. Investors are high-profile, appetizing sitting duck targets for all types of malicious, frivolous and opportunistic lawsuits. A legal entity can provide that critical barrier of protection for separating personal and business affairs so that everything is never at risk at the same time and actually works as a serious deterrent to scare off would be predators. This applies to a range of issues from making a business mistake or taking a loss to becoming party to a divorce or victim of a personal liability suit.
There are some things not to go cheap on, and if you skimp on this it can be extremely costly later. In fact many top pros have many entities formed to do business through.
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