Benefits of Incorporating Your Real Estate Business:

Savings on Self Employment Tax:

In addition to the normal business expense tax deductions you get as a corporation (such as insurance, transportation, office expenses, travel and many others); you may be able to save as much as 15.3% on a portion of your income.

As a sole proprietor, all of your net income (after tax deductions), is taxable as self-employment income.  This is currently taxed at 15.3% for the first $97,500. Plus, it is also subject to normal income taxes.

However, if you form a corporation and pay yourself a “reasonable” salary, (with the normal employee tax deductions) and pay the rest of any business profits (net income) as a dividend, this is not subject to the self-employment tax, just the normal income taxes.

Reasonable is defined as what is a “normal” salary for your industry or business.

For example (illustration purposes only):

If your business makes $75,000 a year after expenses, as a sole proprietor you would need to pay 15.3% in self-employment taxes on $75,000 ($11,475.00). However, if you take a “reasonable” salary of $50,000 and pay yourself a dividend of $25,000, you save 15.3% on the $25,000. This is a savings of $3825.00!

The other major reason why individuals choose to incorporate their business is to protect their personal assets, such as a home, car or family savings. In the event of a lawsuit, or if your business should fail, your personal assets generally cannot be touched. In a sole proprietorship or partnership, the individual or partners are personally liable for all business debts.

When you form a corporation or LLC, your company name is registered with the state of formation. At that point, no other corporation is allowed to register another corporation with the same name you have already filed. If you don't incorporate, someone else can start a business in your state with the same name you have already used.

If you are ready to form your own corporation or Limited Liability Company, you can start the process by filling out our secure online order form, or you can call one of our incorporation specialists at: 866-421-8416, and place your order over the phone.