Real Estate Developer Question:
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Explain me what structure of business entity formation is typical?
Answer:
Although most real estate agents operate as sole proprietors, it is not the best approach for lawsuit protection and tax reduction. The best business formation is an LLC to operate your business as an agent; your LLC will contract with the broker.
As a sole proprietor, the income is paid to you individually, and you will receive a 1099 — the worst way to take income. Many options minimize taxes with payments made to an LLC rather than payments made to you as a sole proprietor.
An LLC also protects your personal assets from lawsuits. G. Kent Mangelson, a certified financial planner at the American Society of Asset Protection, said an agent’s total asset protection plan must consider three methods of protection: lawsuit protection, strategies for tax reduction and strategies for estate planning.
As a sole proprietor, the income is paid to you individually, and you will receive a 1099 — the worst way to take income. Many options minimize taxes with payments made to an LLC rather than payments made to you as a sole proprietor.
An LLC also protects your personal assets from lawsuits. G. Kent Mangelson, a certified financial planner at the American Society of Asset Protection, said an agent’s total asset protection plan must consider three methods of protection: lawsuit protection, strategies for tax reduction and strategies for estate planning.
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