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Apr

REIA | Thinking of forming an entity?

Posted by: ajish | Comments (1)

11 OF THE BIGGEST MISTAKES REAL ESTATE INVESTORS MAKE WHEN SELECTING AND FORMING AN OWNERSHIP ENTITY

1. Not considering the fact that you may not need an entity at all

1.1. For example, with smaller properties, the formation and operating costs may outweigh any benefits:

1.1.1. estimate your maximum potential liability (other than your property debt)
1.1.2. determine how much you can protect through insurance
1.1.3. evaluate the remaining potential liability to determine if the benefits outweigh the costs of forming and operating an entity

2. Not identifying all potential conflicts of interest with your co-owners before deciding to hire a single attorney to represent everybody, for example:

2.1. different tax objectives
2.2. different abilities to contribute capital
2.3. different target lengths of holding period
2.4. different exit strategies

3. Not getting your tax advisor involved in the entity selection decision.

4. Not integrating your estate planning attorney in the entity selection and formation decision.

5. Not coordinating with your lender to make sure you know their requirements.

6. Not putting your agreement in writing.

7. Thinking that an entity shields you from all liabilities.

8. Not including a buy-sell agreement in your agreement to provide important benefits:

8.1. Prevent outsiders or heirs with conflicting interest from obtaining ownership
8.2. Ensure the continued legal existence of the entity on death, withdrawal, bankruptcy or expulsion of co-owner
8.3. Ensure continuity of management and control by remaining owners
8.4. Avoid later disputes over the value of a co-owner’s interest in the future
8.5. Prevent the continued involvement of co-owners who no longer contribute value

9. Not considering what happens if and when additional capital is required.

9.1. Termination?
9.2. Dilution of interests?
9.3. Loan by other co-owners?

10. If you are going to form an entity, in most cases, your biggest mistake could be not selecting a limited liability company

11. Paying $800 franchise tax when you file your Articles of Organization (LLC’s only).

By Lerman Law Partners

Jeff Lerman- Real Estate Lawyer will be speaking at FEC/REIA on April 22nd!

RSVP HERE

Be sure to bring your questions and come out to network and learn more about

forming partnerships.

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Categories : Taxes & Tips, fec articles, fec event, fec guest posts, fec topics, general

Comments (1)

Feb

Welcoming Shanna to FEC

“Creating relationships for life” is the motto that Shanna Ponce lives by.

Shanna Ponce

As a realtor, Shanna is able to assist buyers and sellers at a very important stage of their lives and believes that it is essential that she bring them valuable information and guidance to support them. Her goal is to make sure that her clients understand how much their relationship means to her and that she will go the extra mile to make sure that her service exceeds their expectations.

Shanna is dedicated to bringing customer service back to her industry and is doing so one transaction at a time.

Shanna first fell in love with real estate when she and her husband purchased their first home in 2001. They went on to buy five other properties and learned many great lessons along the way. Shanna began her hands on education by working at a real estate law firm and later for a title company. She found her calling when she began her career as a realtor in 2006. While temporarily working in Arizona, she sold both single family dwellings and apartments to investors from Southern California. Shanna found that she loved working with investors because her mind worked similarly.

Creative deals and closing the “impossible transactions” seem to motivate and fulfill her creative nature. In 2007, she returned to Sonoma County where she joined Remax Central Santa Rosa for 2 years. In December of 2009, she had the privilege and opportunity to join Keller Williams Realty where she is supported by a large and innovative team.

When Shanna is not helping others attain their goals, she is spending quality time with her supportive husband Hersol, and their four kids. Hersol and Shanna are raising their children to work hard for what they want and to give back along the way. She visits Honduras, Central America often with her family to visit her in-laws and is determined and dedicated to better the living conditions of their loved ones.

Shanna feels extremely blessed and believes that the most important thing to remember in life is ‘that it’s all about the lives that you touch along the way.’

Shanna can be reached in her office at : 707-484-4811 and by email: shannaleeponce@msn.com

Visit her Website http://shannaponce.com/ to know more about Shanna and her works.