Owning Multiple Real Estate Entities – Is it worth it to own multiple companies for real estate investments? No doubt. With multiple entities you are more likely to reducce liability, and redce the amount you pay on taxes by being able to choose freely from different types of companies. Whether you have multiple LLCs, an LLC and an S corporation, etc. there are many advantages to owning multiple real estate entities. We give you a how-to guide, and explain when to use multiple entities, answer when should you own multiple LLCs, and more.
Multiple Entities: Formation, Advantages and Disadvantages
So you want to improve your real estate investments by forming not only one, but multiple entities? This is a smart move, as you shouldn’t have very different investments in the same corporation. If you do short-term investments (e.g. flipping), as well as long-term investments (e.g. rentals), you should handle these with separate entities.
Definition and Basics: Multiple Entities
- Different entities for different needs
Forming Multiple Entities: What to Remember
There are in fact very few conflicts between owning multiple entities. That means, you are not incurring additional work when you have more than one entitiy. The only issue may be that you need to keep them apart. To find out how to form each type of entity, check out the links below.
Forming an LLC
To form an LLC is a relatively simple process. Our article gives the whole explanation and detailed step-by-step guide about what you need to remember when forming an LLC.
Forming a Limited Partnership
A limited partnership is also among the most popular forms of real estate entities. You are likely to find significant safety and savings when using this form. Only thing to be aware of, that you get along with your partners! Learn more:#
Forming an S Corporation
Sometimes criticized, but this form of corporation is still a handy one to have in the back pocket. Especially for short term investments, this form gives you safety and tax savings. S corporations are great if you already have an LLC for long term investments, but are realizing that your short term investment ideas aren’t well-serviced by this form. Get an additional S corporation! Learn more:
Real Estate Entities: Many Entities, Many Advantages
With multiple entities you have more freedom, as you’re not limited to the disadvantages of one form of corporation.
Multiple LLCs: How Many LLCs for my Properties?
There’s the possibility of choosingg multiple LLCs for different properties. This makes sense when you consider the reason for using an LLC. It is to prevent liability. If your LLC owns many properties, you may not be liable, but damages can be incurred on all properties. That means, that while you may not lose your money, you will lose all your investments.
Multiple LLCs = Less Liability
Do you need a Separate LLC for each Rental Property?
No. It is of course not a bad idea, especially if you’re mostly focused on avoiding liability. On the other hand, if you own many properties, this increasing amount fo LLC can become annoying, and not worth it. In short, you don’t need it, but unless you have too many properties, you should have it.
- No, but you probably should
How to Combine Real Estate Entities
With so many different types of entities, and then on top of that, so many ways to form each entity, you may be stuck in a room with too many doors. No worries though, there is one typical form that will likely fit your needs. It is the combination of a Delaware LLC with an S corporation (or an LLC taxed as an S corporation). The Delaware LLC, thanks to its tax advantages, is well suited to long-term investments. Meanwhile, with an S corporation you are well-suited to take on short-term investments, which are better handled with this form of corporation.
- Delaware LLC + S Corporation
Multiple Entities Summary: Best of All Worlds
With multiple entities, you are most likely to be able to make the right choice. No matter what investment you are making, you will likely find a good fit within either your LLC or limited partnership or the S corporation.
- Mulitple Entities, multiple options
- More likely to save money