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The importance of business formation for real estate investors

Many Illinois entrepreneurs choose to invest in real estate. Perhaps they want to "flip" houses or invest in commercial real estate. In any case, it may be a good idea for them to consider the importance of business formation when it comes to owning real estate. Single-purpose limited-liability companies provide numerous benefits to those who wish to own properties for investment purposes.

Just as is the case with other Illinois business owners, real estate investors who purchase and manage a property through an LLC or other entity structure shield themselves from liability and shield the company from personal liability. Some lenders may require a real estate LLC for these reasons alone. Other than the liability issues, there are also tax issues and the regulations to which the company must adhere.

Many people favor the LLC over other corporate entities because it represents a "middle ground" when it comes to liability, taxation, regulation and other governmental requirements. In addition, setting up an LLC requires much less paperwork and upkeep than a corporation does. Completing a few simple, yet important, steps could result in getting on with business quickly.

Limits to the protections of this entity structure do exist, however. Anyone considering this structure may want to gain a full understanding of the pros and cons prior to doing so. An entity such as an LLC will only provide its benefits and protections if it is formed and maintained properly. A business formation attorney could provide invaluable information regarding how to make this entity structure work to its fullest potential for any real estate investor.

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