Selecting The Best Business Entity For Real Estate Agents

Sep 30, 2021 | Business Consulting

legal advisor checking paperwork

We work with many Realtors on matters affecting their business finances and taxes. One question that comes up is on what business entity is best for real estate agents.

Setting up your real estate business can be both an exciting and challenging time, we love to be a part of that process and to support you as you grow your business. Perhaps one of the most daunting tasks is determining the best business entity for your real estate business. For example, you might be considering a general partnership or sole proprietorship, but these business entities do not provide you, the business owner, with legal protection. And if someone sues your company, you need to ensure your personal assets are safe.

At 4Corner Business Services, we recommend real estate agents set up their companies as either an S Corp or an LLC. While determining the best structure for your business might feel challenging, at 4Corner Business Services, we want to make selecting the best business entity for your real estate company an easy process. In this blog, we’ve included some information on S Corps and LLCs alongside some tips for choosing the best setup for you.

Read More: How Does My Business Structure Affect My Taxes?

What Is An LLC?

A Limited Liability Company, or LLC, is a hybrid between a sole proprietorship and a corporation. Unlike a sole proprietorship, an LLC separates owners (called “members”) from the business, offering protection against lawsuits and business debts. LLCs can have one member or multiple.

Forming an LLC is an easy and relatively inexpensive way to structure your real estate business, with numerous benefits for you and your business. Working with an LLC provides peace of mind for your clients and partners. And most importantly, structuring your real estate business as an LLC provides you, as the owner, with extra personal protection should your company be sued for liability. If this is your first time as a real estate business owner, filing your company as an LLC is a good choice.

What Is An S Corp?

If your real estate business has been in business for several years and has a number of stakeholders, then you might consider structuring it as an S Corporation, or S Corp. Generally, S Corps are more attractive to potential investors. And structuring your real estate business as an S Corp means you only need to file taxes annually, and you are exempt from double taxation. Keep in mind that an S corporation limits ownership to 100 shareholders, all of whom must be U.S. citizens.

Similar to an LLC, S Corp business owners gain limited liability protection, which protects your personal assets in the case of debt or legal issues. However, if your real estate business is more established with a large number of shareholders, then structuring it as an S Corp business, as opposed to an LLC, might be the best choice for you.

LLC and S Corp For Real Estate Agents In Colorado

4Corner Business Services is here to help you set up your real estate business as an LLC or an S Corp in Colorado. We’ll walk you through each step of the process, and can also provide sustained support for your business. For example, our business consulting team can assist you with business planning, tax preparation, and more. Interested in setting up your real estate business as an LLC or S Corp? Contact us today to start the process!

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