Cornbelt Financial
  • Home
  • About
    • Our Team
    • Who We Serve
    • Values
  • Services
    • Tax Preparation & Planning
    • Bookkeeping, Payroll, & Consulting
    • Financial Planning
    • Investment Advising
    • Succession Planning
    • Business Valuation
  • Blog
  • Contact
  • Home
  • About
    • Our Team
    • Who We Serve
    • Values
  • Services
    • Tax Preparation & Planning
    • Bookkeeping, Payroll, & Consulting
    • Financial Planning
    • Investment Advising
    • Succession Planning
    • Business Valuation
  • Blog
  • Contact

Keep real estate separate from your business’s corporate assets to save tax

7/11/2017

0 Comments

 
Picture
It’s common for a business to own not only typical business assets, such as equipment, inventory and furnishings, but also the building where the business operates — and possibly other real estate as well. There can, however, be negative consequences when a business’s real estate is included in its general corporate assets. By holding real estate in a separate entity, owners can save tax and enjoy other benefits, too.

Capturing tax savings


Many businesses operate as C corporations so they can buy and hold real estate just as they do equipment, inventory and other assets. The expenses of owning the property are treated as ordinary expenses on the company’s income statement. However, if the real estate is sold, any profit is subject to double taxation: first at the corporate level and then at the owner’s individual level when a distribution is made. As a result, putting real estate in a C corporation can be a costly mistake.

If the real estate is held instead by the business owner(s) or in a pass-through entity, such as a limited liability company (LLC) or limited partnership, and then leased to the corporation, the profit on a sale of the property is taxed only once — at the individual level.

LLC: The entity of choice


The most straightforward and seemingly least expensive way for an owner to maximize the tax benefits is to buy the real estate outright. However, this could transfer liabilities related to the property (such as for injuries suffered on the property) directly to the owner, putting other assets — including the business — at risk. In essence, it would negate part of the rationale for organizing the business as a corporation in the first place.

So, it’s generally best to put real estate in its own limited liability entity. The LLC is most often the vehicle of choice for this. Limited partnerships can accomplish the same ends if there are multiple owners, but the disadvantage is that you’ll incur more expense by having to set up two entities: the partnership itself and typically a corporation to serve as the general partner.

We can help you create a plan of ownership for real estate that best suits your situation.

© 2017
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Author

    Adam Carr, MBA, EA

    Archives

    May 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    February 2016
    January 2016
    December 2015
    November 2015

    Categories

    All
    Business
    Charity
    Education
    Estate Planning
    Identity Protection
    Investments
    Life Events
    Medical
    Real Estate
    Tax Forms
    Tax Law
    Tax Planning
    Tax Reform

    RSS Feed

Picture
© COPYRIGHT Cornbelt Financial, LLC 2023. ALL RIGHTS RESERVED.

There are no warranties implied.
Cornbelt Financial, LLC (“RIA Firm”) is a registered investment advisor located in Denver, Colorado. Cornbelt Financial, LLC may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Cornbelt Financial, LLC’s website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Cornbelt Financial, LLC’s website on the internet should not be construed by any consumer and/or prospective client as Cornbelt FInancial, LLC’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the internet. Any subsequent, direct communication by Cornbelt Financial, LLC with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Cornbelt Financial, LLC, please contact the state securities regulators for those states in which Cornbelt Financial, LLC maintains a registration filing. A copy of Cornbelt Financial, LLC’s current written disclosure statement discussing Cornbelt Financial, LLC’s business operations, services, and fees is available at the SEC’s investment adviser public information website – www.adviserinfo.sec.gov or from Cornbelt Financial, LLC upon written request. Cornbelt Financial, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Cornbelt Financial, LLC’s website or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
This website and information are provided for guidance and information purposes only.  Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy.  This website and information are not intended to provide investment, tax, or legal advice.
Insurance products and services are offered and sold through individually licensed and appointed insurance agents.