Investment Advise You Should Ignore From Your Peers
Choosing the Right Business Entity
One thing many people enjoy doing is giving advise. This seems to be especially true for investment advise. A huge mistake investors can make is assuming all real estate investors can do the same things and get the same results. This includes choosing a entity structure for your business. If a fellow “flipper” uses an LLC, it’s not safe to assume that an LLC is also right for your business.
Choosing the right structure for your business is an extremely important decision. Starting a new business is exciting and most new entrepreneurs are eager to jump right in and make things happen. Some take the investment advise of their peers and blindly do what they are doing just because it seems to be the norm. Not taking the time to fully understand what entity you choose, could have some unwanted consequences.
The structure you choose for your business will have legal implications, tax implications, and filing requirements. Liability and asset protection are just two things to consider on the legal side. Keeping taxes low or avoiding double taxation are two elements on the accounting side. There is much to consider. As a new business you might not be aware of all the implications at the beginning. That is why it’s important to research investment advise that your peers provide.
There has been much debate in the world of real estate regarding the best structure. There’s no “one” right choice. It all comes down to YOUR business. Different companies have different requirements and goals which will ultimately affect the business structure. You need to determine which structure(s) make(s) the most sense and choose the one(s) that best suits your business.
When you are first stating out you don’t always have all the pieces of your business figured out. You know what, we were no different. As our business evolved though; we realized we needed to change our structure as our understanding of the business matured. We actually dissolved several entities to create new ones. Yes, there were cost implications to doing that, but at the end of the day those changes would help us as opposed to hinder us, so it was totally worth the expense. That’s all a part of learning how to invest in real estate.
The three main types of business structures:
Then there is the hybrid form of partnership which is the Limited Liability Company (LLC).
I’m not going to go through the different business entities. There are a multitude of posts out there from people who are much more qualified than me to speak to the advantages and disadvantages of each.
The important thing take from this post is that each business is different. Don’t decide to go with a particular structure just because someone else in your business niche tells you it’s what they use. That is investment advise you don’t want to follow. Also, please don’t choose one just because it’s the least expensive!
Simple Acquisitions’ business structure is actually made up of a combination of entities; partnerships and LLCs. We took the time to establish our business model and considered our long term goals. We consulted with our accountants and attorneys and were advised on the best structure for our company. Develop those relationships with your power team. As we move forward with our business we have confidence that we have the right structures in place for us and our private lenders partners.
If you want to learn more about entity structures; contact your accountant and attorney!
If you want to learn more about how to invest in real estate or find out how getting involved can benefit YOU, we can help you with that! Just drop us a line.
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Remember, real estate doesn’t have to be complicated. With Simple Acquisitions, it’s smart and simple!!