Should real estate investors incorporate?

Written By limadu on Sabtu, 19 Oktober 2013 | 22.16

NEW YORK (Money Magazine)

The main reason to set up an entity like a corporation is to protect your personal assets against a lawsuit -- say, if someone gets injured on your property.

Instead of incorporating, though, Richmond real estate attorney Katja Hill suggests you set up a limited liability company, or several LLCs, to hold your properties.

LLCs are easier to maintain, she says, than the "S corp" corporate structure that's also used by small businesses.

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A lender may make it hard for you, however, to move a mortgaged property to an LLC. A transfer might also trigger a tax hit (not likely in Virginia, but rules vary by area). In both cases, the best fallback for shielding assets is umbrella insurance. In fact, even with an LLC, Hill advises getting a policy to be extra safe.