Starting a real estate business can be a lucrative venture as it is a rapidly growing industry. However, most beginner real estate investors act individually and never consider using a real estate investment company. Most of them may don’t realize the advantages of forming one or how to start a real estate investment company.
If your dream is to be a real estate mogul, it’s crucial to have a good understanding of how to start a real estate investment company before you make your first investment.
There are several merits to using a real estate company to conduct real estate deals and manage your property investments. For example, you will have certain tax advantages, reduced personal liability, and unlimited growth potential.
Below are the steps involved in starting a real estate investment company:
Choice of Legal Entity in the United States of America
For business purposes, you will need to choose the type of business entity you want your company to be. Normally, you can start a real estate investment company as a sole proprietor, a partnership, a limited liability company (LLC), a C-Corp, or an S-Corp. Some small real estate businesses are operated with no formal legal entity as is the case with a real estate sole proprietorship. However, due to the liability hazard in real estate deals, it would be wise to form an entity that distinguishes your personal assets from those of your business.
In most cases, a limited liability company (LLC) is an easier solution for real estate investors than a corporation. It offers benefits compared to other entity forms. For instance, it gives greater flexibility when delegating management responsibilities and in the distribution of profits. Nonetheless, you may want to check with a real estate attorney or corporate accountant to determine the best way to structure your business.
Choice of the state in the United States of America
As with any business formation, you can choose which state in which to file. Obviously, many investors choose their home state, since they have to pay taxes to that state to operate. So you must know the most fundamental factors to take into account when choosing which state to form your real estate investment LLC.
The answer may differ depending on the types of investments you want to make and the type of LLC you want to start, but generally speaking, the following five states come out on top.
- Wyoming – In Wyoming, there’s no income tax and it doesn’t charge extra for non-residents to form an LLC.
- Texas- It costs $300 to form an LLC in Texas, but there isn’t an annual fee for most LLC owners. Although LLCs have to pay franchise tax, the franchise tax rate is on the low side.
- Nevada – Nevada’s businesses don’t have to pay income tax and to sweeten the deal even further, it only costs $75 to form a Nevada LLC, although you’ll also need to pay $200 for a business license and $150 to file an annual list of members.
- Montana – In Montana, It costs only $70 to form an LLC and each annual report you file comes with a maximum fee of just $35. Unless you decide to have your LLC taxed as a partnership or S Corporation, it won’t be subject to income tax.
- South Dakota – South Dakota is an extremely LLC-friendly state with an LLC formation fee of just $150 whether you live within its borders or not. Best of all, there’s no income tax for individuals or corporations, LLCs included.
What Documents Are Needed?
To register a company in the U.S. you don’t need to present any documents, only information. Documents would be essential in case you want a US address or need to open a bank account, but not for company registration.
Do I Need To Be In The U.S. To Open My Company?
Not at all. You don’t need to live in the U.S in order to incorporate a company there and You do not need a physical address as long as you retain a Registered Agent for your corporation or LLC.
Things to Consider as a Real Estate Investor
- Getting a legal advisor- As indicated earlier, getting legal, accounting, and tax advice from experienced professionals will help ensure property investors make an informed decision about how to structure their businesses. Those experts can give wisdom about what to do and not do. They can also help avert mistakes that can cost investors precious time and money.
- Insuring- To safeguard property from liability and damage, investors should consider a comprehensive landlord’s property insurance policy in the business name. It’s important to have written proof showing the business name as the entity insured, so the insurance company won’t have reason to deny coverage in the event of a claim. Investors who have registered different entities for individual properties would likely need separate coverage for each one.
With so much information out there, starting a real estate business or LLC can be a complicated process. Damalion experts will assist you to get started with registering your USA real estate company.
