LLC? If I Sell Real Estate for a Living?

Joined
Jan 28, 2012
Messages
2
Reaction score
0
I am a Realtor and some of my co-workers have a LLC. I would like the opinions of the grand minds out there if this would be beneficial to me and my business. Thank you in advance for all replies.
 
Joined
Dec 23, 2010
Messages
82
Reaction score
12
Generally the "LLC or not?" question turns on three basic areas: Tax planning, raising capital, and liability protection.

The first one can probably be dispensed with right away. For a one-person operation, there's no income tax difference between operation as a sole proprietor (as you are now) vs. operating as a one-person-owned LLC. (You might hear an argument that by having your LLC elect so-called "S Corp" treatment, you could reduce your self-employment tax a bit. I'd counter that while that's true in some scenarios, the nature of a realtor's activity (i.e., all profits are solely attributable to the personal efforts of the individual), this argument would be unlikely to get the IRS' blessings. But that's a more complex topic that can't be adequately dealt with in a forum post.)

The second issue is probably just as easily dispensed with. An LLC (or corporate structure) would be necessary if you were planning on raising capital from outside investors.

The liability protection issue is maybe less clear cut, but I'd guess that for a realtor, there would be little benefit, if any at all, in wrapping an LLC around your biz activity. What an LLC can do in certain circumstances is to insert a protective firewall between the owner's personal assets and any debts (including lawsuit claims) that might arise against the business itself. It's not bulletproof, but it works pretty well in many circumstances.

But given that the general nature of your business is that you personally ARE the business, I'm doubtful an LLC could provide much insulation.

For example, instead of owning a factory myself, I'd rather own an LLC which owns the factory. In the event of a lawsuit claim resulting from a factory accident, the claim would be imposed on the factory owner (my LLC) rather than me personally. Hence my personal assets remain (hopefully) one step removed from the claim, and hence beyond its reach.

But the nature of the business of being a realtor is such that you can't separate the individual from the business, the way you could separate a factory owner from the factory's activity itself.

Still, the liability-protection angle falls squarely in the domain of the attorney, which I am not. If conversations with your colleagues (who have established LLC entities for their practices) lead you think there might be some liability-protection benefit for you in there somewhere, have a quick chat with an attorney who practices in the small-biz / LLC set-up arena. He / she can give you a definitive answer.
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top