Wholesale Real Estate: The Benefits of Incorporating

Despite so many arguments for forming a legal entity for wholesale real estate and many real benefits, why do some investors continue to try to do without it?

Forming a corporation, LLC, or other form of legal partnership is not only packed with benefits for wholesale home sales, it is one of the first and most basic steps for any new entrepreneur or business. So what’s stopping aspiring real estate investors from taking this smart first step?

Few can argue that they have not been advised to do this, so it is not a lack of knowledge. Some may simply be confused and overwhelmed by the different options they have or not know where to start. Some may think they can get away with it without it. However, the excuse given by most is that they are trying to save on cost.

Interestingly, for all the benefits of wholesale, getting organized this way offers actually one of the quickest and easiest parts of getting up and running in any form of real estate investment or business. For most investors it is simply a matter of hopping on the web. In most states and even other countries, an LLC, corporation, or foreign equivalent can now be created and filed in a matter of minutes via a mobile device. While some more exotic locations may be more expensive to file, in most US states the cost is just over $100. Of course some, and especially those with partners, should consult a lawyer or a professional onboarding service to help them out, but it quickly becomes second nature with seasoned professionals pitching them themselves all the time.

Aside from staying organized, keeping things official, avoiding confusion and arguments with partners later on, increasing credibility with prospects, investors, and vendors, or even gaining access to additional financing through trade credit, the biggest advantage of incorporating has to be the financial savings it provides.

Without going over the line in the provision of tax advice since the circumstances of each one are different; Operating and remodeling homes through a legal entity often provides an extra layer of protection against taxes or at least deductions.

So perhaps the most significant of the benefits of wholesale is liability and asset protection. Investors make attractive, high-profile targets for all kinds of malicious, frivolous, and opportunistic lawsuits. A legal entity can provide that critical barrier of protection to separate personal and business matters so that everything is never at risk at the same time and, in fact, works as a serious deterrent to scare off predators. This applies to a variety of issues, from making a business mistake or suffering a loss to becoming a party to a divorce or the victim of a personal liability lawsuit.

There are some things that aren’t cheap, and if you skimp on this, it can be extremely expensive down the line. In fact, many of the best professionals have many entities formed to do business through them.