Should I Become Incorporated
I currently own 2 duplexes that are worth together about 250k. I am not sure if I should be forming a corporation or what for tax purposes. Would this benefit me?
Also, I am 23, and marriage is most likely in my future...will this prevent anyone from being able to take these houses from me if something would happen.
There are some tax advantages and some extra costs or extra taxes if the corp owns the property.
As to liability protection. Having the property in a corp and not mixed with your other personal assets creates a fire-block of sorts between the two worlds. It does not mean that if someone wins a case against the corp that you will not lose the property (assuming a major lose in the case). Just that an event in one area does not have to bleed over into the other area. BTW - This means that if someone sues you for something at your home the corp will not lose the property. It might mean you lose ownership of the corp.
I suggest you dig up some books on the topic. Things you can find that are not that costly (library?). Then you will have a better working knowledge with which to speak with an attorney who knows the topic. They can provide the right structure based on your actual needs.
Take a look at umbrella (liability) insurance as that might provide many of the benefits for little effort. I use such a policy.
John
[addsig]
an LLC would most likely be your best bet they are relatively simply to set up
and would provide you with some asset
protection. Check with your cpa on any tax issues of transfering the property into an LLC.
Quote:
BTW - This means that if someone sues you for something at your home the corp will not lose the property. It might mean you lose ownership of the corp.
Consider using a LLC incorperated in one of the many states that use charging orders as the exclusive ability to overtake a entity. A charging order allows a creditor that sues you personally (and wins) to only be entitled to the distributions of the LLC, not the ownership of the LLC itself (as with corporations).
You, as manager of the LLC, can choose not to take a distribution of your profits. Since the LLC is pass-through, owners still must pay tax on the gain. Well you can pay yourself a small salary to cover those taxes but the judgment holder must pay tax on money it never received!
This is a sure fire way to settle for pennies on the dollar (or better yet used as a deterrent from ligitigation in the first place!)[ Edited by myfrogger on Date 10/11/2004 ]