Real estate company: Founding a company

Do you want to buy and rent out your first property? You have inherited a property and now want to work in real estate management, property management and other related areas yourself, or even more, you want to become a real estate investor yourself? Then the big question is, which company is the right one? What is the first step?

Basically, you have many different possibilities and options as to how you can set up your business for the future. To give you an initial overview, we have written this guide to the different types of companies for you. Here you will learn about the different options you have as a founder in the USA. Definitions, start-up tips, advantages, disadvantages and taxes. Everything you need to make a good decision.

Legal forms USA – Overview

• LLC (cf. GmbH)
• Limited partnership (cf. limited partnership)
• General partnership (cf. general partnership)
• Real Estate Limited Partnership (cf. Immobilien-KG)
• C Corporation (cf. stock corporation)
• S Corporation (cf. small stock corporation)
• Real Estate Holding (cf. Real Estate Holding)
• REIT/ Real Estate Investment Trusts (cf. real estate investment company)

Combine legal forms:

• Multiple Entities

For the sake of completeness:

• Sole Proprietorship (cf. sole proprietorship)
• Owning private real estate in the USA (cf. private real estate ownership in Germany)
• Tenancy in Common (TIC) (cf. fractional community)

Limited Liability Company (LLC)

An LLC (Limited Liability Company) is a flexible and popular legal form in the USA. It offers its owners the advantage of limited liability, similar to a corporation, but combines the tax advantages of a partnership. Profits and losses are attributed directly to the shareholders, which avoids double taxation. In addition, an LLC offers a simple structure and flexibility in administration, which makes it particularly attractive for small companies.

• LLC

LLC: My recommendation for the first 10 properties

For the first two to ten properties, an LLC (see GmbH in Germany) is best suited to minimize liability risks and at the same time take advantage of tax benefits. The LLC limits the personal liability of the owners, while profits and losses are attributed directly to the shareholders, which avoids double taxation. In comparison, a Limited Partnership (see KG) offers more flexibility in terms of passive participation, but the general partner bears full liability. A general partnership (see OHG) involves higher risks due to unlimited liability.

• More about the LLC

Limited Partnership

A limited partnership consists of at least one general partner and one limited partner. The general partner bears full liability for the company’s debts, while the limited partner is only liable to the extent of their contribution. This structure is often used in equity investment or real estate projects, as it enables a clear separation between active and passive participation. From a tax perspective, a limited partnership benefits from the fact that profits are only taxed at partner level.

• Limited Partnership

General Partnership

A general partnership is a partnership in which all partners have unlimited liability. This legal form offers flexibility and simple formation without major formalities. Profits and losses are attributed to the partners and are taxed personally by them. However, the partners’ full liability for the company’s debts entails a higher risk, which is why this form may be less suitable for certain business models.

• General Partnership

Real Estate Limited Partnership (RELP)

A real estate limited partnership (RELP) is a special form of limited partnership that is used for real estate projects. In this structure, passive investors invest as limited partners, while the general partner takes over the operational business and has unlimited liability. RELPs offer the advantage of tax transparency and are particularly suitable for large real estate investments where the parties involved want clear liability and profit relationships.

• Real Estate Limited Partnership

C Corporation

A C corporation is an independent legal entity that is separate from its owners. It offers a comprehensive limitation of liability for its shareholders. Profits are taxed at the corporate level and distributions to shareholders are subject to personal income tax, which can lead to double taxation. Nevertheless, this legal form offers advantages such as access to capital markets and the possibility of having an unlimited number of shareholders.

• C Corporation

S Corporation

The S Corporation is similar to the C Corporation, but with the difference that profits and losses are passed on directly to the shareholders, thus avoiding double taxation. However, there are restrictions on the number and type of shareholders. This legal form is often chosen by smaller companies that want to benefit from tax transparency but at the same time need the limited liability of a corporation.

• S Corporation

Real Estate Holding

A real estate holding company is a type of company that is used specifically for the ownership of real estate. This structure provides legal and tax separation between the owners and the property owners. It is ideal for investors who own and manage several properties without holding them directly in their own name. This allows liability risks to be reduced and tax advantages to be exploited.

• Real Estate Holding

REIT (Real Estate Investment Trust)

A real estate investment trust (REIT) is a special type of company that invests in real estate and is traded on the stock exchange. Investors can acquire shares and thus invest indirectly in real estate without owning real estate directly. REITs are tax-privileged, but must distribute a large part of their profits to shareholders as dividends. They are a popular option for investors looking for a liquid and diversified investment opportunity in the real estate sector.

• REIT

Multiple Entities

The combination of several company forms offers entrepreneurs the opportunity to spread risks and maximize tax advantages. For example, an LLC can be used in conjunction with a corporation to separate operational and administrative functions. This is particularly useful in the real estate industry or for more complex business models where different business areas need to be legally and fiscally separated.

• Multiple Entities

Sole Proprietorship

Sole Proprietorship, also known as a sole proprietorship, is the simplest legal form in the USA. The owner bears sole responsibility for the business, but also has unlimited liability for its debts. This form is suitable for smaller companies or freelancers who do not require a complex structure. As there is no separation between the company and the owner, taxation is levied directly on the owner’s income.

• Sole Proprietorship

Owning private real estate in the USA

Direct ownership of real estate in the USA as a private individual offers both opportunities and risks. Owners benefit from the increase in value of the property and the rental income, but must also observe the tax and legal obligations. In addition, personal ownership of real estate can lead to liability risks, which can be minimized by using a suitable legal form such as a real estate holding company or an LLC.

• Owning private real estate in the USA

Responsibilities: What Does a Tax Consultant Do?

Before diving into risks, tips, and fees, let’s start with an overview: Which core areas does a tax firm cover? The work goes far beyond classic bookkeeping — from financial accounting through full payroll accounting and salary calculations to strategic tax planning, choice of legal structure, setting up a holding company, and representation before the tax office and tax court.

What Does a Tax Consultant Do, Simply Explained?

The ten typical core tasks of a tax firm for companies:

1. Tax Planning & Advisory: Choice of legal structure, holding structure, tax optimization
2. Financial Accounting: Posting, chart of accounts, ongoing entries
3. Payroll Accounting: Salary calculations, social contributions, reports to health insurance and tax office
4. Einkommenüberschussrechnung (EÜR) for freelancers & small businesses
5. Preliminary Declarations: Value Added Tax, Payroll Tax, Capital Gains Tax
6. Annual tax returns: Income tax, capital gains tax, corporate tax, trade tax, inheritance and gift tax
7. Annual financial statements & balance sheet: including notes, management report, publication in the Federal Gazette
8. Review of tax assessments: appeal, lawsuit, representation before the tax court
9. Special real estate topics: depreciation, §6b Income Tax Act, commercial land trading, speculation periods
10. Support in special situations: inheritance, gift, sale, insolvency, tax audit

A complete overview of the relevant terms can be found in the Real Estate Lexicon.

Compare tax advisors: The 3 biggest risks

Are you looking for a good tax advisor nearby? Before you sign — do you know the three biggest risks? Because choosing the wrong firm can have long-term financial consequences that many entrepreneurs only realize after years.

Risk 1: Intensive, regular commitment

After signing a mandate agreement, you are bound to the firm in nearly all financial and tax aspects — from monthly pre-notifications to payroll calculations up to inquiries, often almost weekly. The interconnection is particularly close for self-employed individuals, small GmbHs, and growing companies, where management often handles many tasks themselves.

A change is therefore not possible overnight. A realistic timeframe for a clean transition: 3 to 6 months — including data transfer (DATEV inventory, client master data), change of power of attorney at the tax office, and final invoice from the old firm.

Risk 2: Monthly Cost Burden

Tax advisors do not work for free. The costs consist of three blocks:

1. Ongoing bookkeeping — billed according to the subject value (revenue/expenses), Table C of the StBVV
2. Payroll accounting — flat rate per employee and month (15–25 €)
3. Additional services — consultation, annual accounts, special questions, all charged by the hour at rates of 120–300 € (consultant) or 60–120 € (employee)

The catch: The higher your turnover, the higher the bookkeeping fee — even if the effort does not increase proportionally. If your turnover jumps from 250,000 € to 1 million €, the bookkeeping flat rate doubles, even though the number of entries may only increase by 30%. Tip: Negotiate a flat-rate agreement under §14 StBVV once you reach a certain turnover level.

Risk 3: Losing money due to insufficient advice

The training to become a tax consultant is by no means trivial — tax consultant exam, professional experience, tax specialist training. However: Many tax consultants learn standards, not tax planning.

Many tax consultants are tax auditors — not tax planners

They handle the posting, invoice employees appropriately, and carry out the annual accounts correctly. The question is: Is that enough? Depending on the company, goals, and scale, a tax consultant should do much more — especially in the real estate sector.

Lack of advice carries two risk factors:

• Losses from missed advice: unused tax benefits, lack of holding structure, no mention of calculating the speculation period when selling real estate
• Risks from too much (unstructured) advice: cost-benefit ratio turns — every minute is billed

Suddenly, the monthly costs are no longer 400, 500 or 800 €, but 4,200 € — due to unplanned advice, document procurement by employees and research time. By the time a managing director notices this, years may have passed.

Calculation example: What does poor advice really cost?

Let’s take a realistic scenario of a medium-sized GmbH with real estate activity:

Difference: 48,200 € per year — and that without the compounding effect of the reinvested amounts. Whoever reinvests 30,000 € annually for 10 years at 6 % ends up with about 395,000 € more wealth. This is the real cost of poor advice.

Paying taxes means losing profits

Taxes are the biggest cost factor in most companies

By the way: What is actually your biggest monthly cost factor once you’re in the five- to six-figure revenue range? Rent? Personnel? For the majority of companies, it’s actually taxes — considering corporate tax, trade tax, capital gains tax, and additionally the speculation tax or real estate transfer tax when purchasing property.

Checklist: The 3 biggest risks at a glance

• Intensive commitment — switching takes 3–6 months
• Amount of monthly and unplanned additional costs
• Long-term loss of wealth due to poor tax planning (too much tax + costs + missed reinvestment)

Keep in mind: Tax planning is largely in your hands — the tax advisor is a sparring partner, not the sole person responsible.

Find a tax advisor: The 3 best tips from practice

After the risks, here are the tips: How do you find a good tax advisor? Three strategies that have worked in over 20 years of practice.

Tip 1: Avoid ads

The most important tip first: Don’t click on the ads in search engines. You’re looking for a tax advisor in Berlin-Mitte, Cologne or Hamburg and type — like 92% of people — your query into a search engine. The top positions are paid ads, marked only by a small “Ad” or “Sponsored”.

Practical tip: Go directly to page 2 of the search results. There you’ll find the law firms that don’t finance their marketing budget from client fees — and thus often the more serious providers. After all, who ultimately pays the marketing budget? You, the client.

Tip 2: Check reviews on online portals

Popular are comparison portals, online magazines and industry directories (proven expert, Google Business, kanzleifinder.de of the Federal Tax Consultants Chamber). Pay attention to qualitative and quantitative meaningful reviews:

• At least 5–10 reviews, in big cities 20+
• Meaningful texts (not just “5 stars, top!”)
• Reviews spread over several years (no star explosion within 4 weeks)
• Check negative reviews — how does the office react to them?

Tip 3: Recommendations from experienced entrepreneurs

The goldmine: Recommendations from other entrepreneurs. Important — the sources must match:

• Entrepreneurs, not private individuals (different matter, different requirements)
• At least 3–5 years of client relationship (shorter is not meaningful)
• Comparable industry & size — a restaurant tax consultant is not a real estate specialist
• Ideally with similar structures (holding company, GmbH & Co. KG, international connection)

Insider Tip: Anyone investing in real estate should specifically look for advisors who manage mandates in the areas real estate as an investment, buying an apartment building or buying a historic property.

Insider: Diese drei Berater-Typen gibt es