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Can setting up a company benefit my real estate investments?

Dealing with large investments that have high profit and loss potentials involves a significant amount of risk. It also has tax implications. As such, when you are investing in real estate to make capital gains in a sale, you should consider creating a company so that you can protect your assets and manage your finances in a structured way.

There are many benefits to creating a holding company, otherwise known as a Limited Liability Company (LLC). The main benefit is that if you suffer a loss as the result of a failed investment, your personal assets and other assets held in separate LLCs, will be protected. The following are some of the main benefits of starting a real estate holding company.

It may help you prevent double taxation

In 1988, a court ruling made it possible for real estate investors to take advantage of LLCs to avoid double taxation. In essence, the LLC would operate in the same way as a sole proprietorship from a taxation perspective.

You'll have flexibility to distribute your profits

When you have multiple LLCs, you will have the freedom to decide when you withdraw funds. In this way, you can be strategic in planning your income sources.

You can invest in property overseas

When you have a holding company, you will be able to seek exciting real estate opportunities overseas and explore new markets.

Creating an LLC is relatively easy to do, but it does require that you have a solid understanding of business administration. Make sure that you consider LLC creation as part of your wider business-planning strategy.

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