Which Entity Is Best For A
Real Estate Investor?
Part One
By JJ Childers
Without
a doubt, the single biggest question that I receive as I travel the
country and meet with clients is this: which is the best entity? While
it is indeed the most common question I'm asked, it's also the hardest
to answer. The reason for that is that I don't think that there is a
"best" entity. You see, some entities will give you certain
benefits that aren't available through other entities from a tax standpoint.
At the same time, these entities may not offer the same benefits as
another type of entity from an asset protection standpoint. Additionally,
they may not offer the estate planning benefits offered through other
types of entities. In a nutshell, there is no one entity that will solve
all your problems or cure all your ills. Simply put, you must have an
overall plan put into place.
The process
of implementing an overall plan is what is oftentimes referred to as
"entity structuring". Entity structuring is about reviewing
the current situation of a client in order to identify their needs,
concerns, and overall objectives and implementing a plan to address
these areas. As you can imagine, each individual will have a different
situation when you factor in all of these issues. As such, each person
will need a customized plan. This is accomplished through the process
of entity structuring.
In implementing
an entity structure, there are always three key areas that must be focused
upon. These three areas are as follows:
1) asset
protection;
2) estate planning; and
3) tax reduction.
Regardless
of what type of activities that you're involved in (real estate or otherwise),
you must always focus on these three areas. The reason for this is that
each of these three areas poses a significant threat to your ability
to create, accumulate, and preserve wealth. Actually each of these is
so important that we need to take a look at them one by one.
Regarding
asset protection, it's no secret that we live in an increasingly litigious
society. Studies have shown that there is a new lawsuit filed on average
every 30 seconds in this country. One out of every four people will
be sued each and every year. The average number of lawsuits over an
individual's lifetime is five. Of these five lawsuits, one will end
in financial devastation. With statistics like these, it's no wonder
that there's such an intense demand for entity structuring. In order
to protect your assets, you must implement an entity structuring plan.
With respect
to the area of estate planning, it's a fact of life that we will all
eventually pass away. When that time comes, it's crucial that we have
a plan in place for the orderly distribution of assets to our heirs
and beneficiaries upon death. Far too often, this area tends to go overlooked.
For many investors, one of their primary objectives in building up a
real estate portfolio is to provide opportunities for family members
that they may not have had. Unless you implement a solidly structured
wealth preservation plan, all that work may be for naught.
Last but
certainly not least is the area of income taxes. The biggest threat
to the creation, accumulation, and preservation of wealth is the financial
destroyer of taxes. Because of this, it becomes increasingly important
to focus on strategies for effectively handling our tax obligation.
I suspect that a great deal of the questions that come up through this
series will deal with taxes and I look forward to sharing with you specific
strategies for reducing and even eliminating certain taxes through the
implementation of a well-designed entity structure.
In summary,
the realization of a well-designed asset protection plan requires the
consideration of all three of the areas that we've discussed. Simply
relying upon one single entity will not enable you to meet your objectives.
Instead, you must formulate an overall plan to consist of various entities
performing various functions. You must begin the process of entity structuring.
If you would like assistance in putting your plan together, feel free
to contact us at info@secretmillionaire.com
to learn how to put your plan into action.
ACTION STEP
In part
two of this two part answer, we will be looking at the various entities
available and the benefits of each. Between now and then, take some
time to list out all of your assets, establish a value for those assets,
list the names of how those assets are held and get a handle on how
your assets are currently structured (or not structured). This will
better prepare you for establishing a plan of attack for how to implement
your structure.
Continue
to Part Two...
About JJ Childers
JJ Childers
is a licensed attorney and active real estate investor and developer.
As an attorney,
he deals primarily with the areas of asset protection, estate planning,
and tax reduction. Simply put, he assists people with overcoming the
obstacles of lawsuits, income taxes, and death taxes. He travels the
country extensively sharing his strategies with other real estate investors
as well those involved in various types of small businesses. Through
his innovative and dynamic strategies, he has literally helped thousands
of people save millions of dollars in taxes.
Even better,
he has the knowledge and experience to apply these strategies to real
estate investors in particular. He teaches these strategies to help
real estate investors build in more profits to their real estate deals
and to properly protect those profits. The unique combination of being
both an attorney and real estate investor make him a hot commodity with
real estate investors throughout the country.
