Setting up a house flipping business is probably one of the best things that you can do in your lifetime. Not only can it provide you with the means to gain financial freedom, it can also enable you to provide a better life for your family and loved ones. But before you consider setting up a real estate venture that focuses on buying and selling real estate for profit, you’ve got to do some research first. As we all know, it is important to avoid rushing into things, especially if they concern your hard-earned savings.
If you’re planning to create a company that will manage and hold title to your investment properties, here are the four common business entities formed by real estate entrepreneurs to protect their assets:
Corporation. According to Wikipedia, a corporation is an “institution that is granted a charter recognizing it as a separate legal entity having its own privileges, and liabilities distinct from those of its members.” Management of this particular business entity is centralized and is run by a board of directors. Although a corporation is considered a legal entity that can be sued, you don’t have to worry about losing your personal assets because you can avoid personal liability should you run into legal problems.
LLC. LLC stands for limited liability company. Like in a corporation, business liability is separated from personal liability and has one or more than two owners. LLCs are a popular choice for those who want to establish a house flipping business. It is because if the company is held responsible for a debt, the investor is only liable for the investment that he has made into the company.
Partnership. In a partnership, investors work together to achieve mutual goal. However, unlike in corporations and LLCs, those who enter into partnerships can be jointly held liable for debts. You can also be held responsible for the actions of your partners. In addition, profits, as well as losses, will also be shared among the owners of the company.
Limited Partnership. A limited partnership is pretty much structured like a general partnership. The difference, however, is that in an LP, an investor’s liability is limited to the amount of money that he has injected into an investment.