Benefits to Separating Your Business Real Estate from Your Business

If you’re operating your business out of a building or on a piece of property that you also own, you may consider separating the two into individual entities.

Here’s why:

For starters, let’s say your business is owned by the ‘Acme Corporation’ … and you create a second entity, ‘Wily Coyote, LLC,’ to hold title to your real estate. If, for some reason, the Acme Corporation is hit with a lawsuit, the real estate owned by Wily Coyote, LLC will not be at risk of loss.

There are tax benefits to separating your business from your business real estate, too. As its own entity, ‘Wily Coyote LLC’ can lease real estate to ‘Acme Corporation.’ Given the affiliation and affinity between the two companies, the terms could be drawn up as legally neutral, and the lease arrangement, if reasonably bona fide, could provide tax benefits to both companies.

Additionally, holding real estate in a limited liability company (LLC) provides tax advantages not applicable in the case of corporations.

Separating your business from your real estate holdings can also help you in your estate planning. Having separate entities allows you more flexibility when transferring wealth and other assets on to your heirs.

As an example, you can transfer your real estate assets gradually, through LLC membership grants, without triggering gift tax liabilities. All, while still maintaining control over those assets, and their day-to-day management.

For more than 30 years, the professionals at Erwin Law have been guiding Clients through the legal complexities of their business – and personal – holdings.  And they’re ready to help you, too. Call James Erwin today at 773-525-0153 or email him at jerwin@erwinlawfirm.com.