Real Estate Investor Magazine South Africa Real Estate Investor Magazine - Dec/Jan 2018 | Page 58

US INVESTMENTS
What is
an Entity?
How Can it Protect You?
A
GARRETT SUTTON
Best-selling author of Start Your
Own Corporation, Loopholes
of Real Estate, and seven other
books. He practices corporate
and LLC law in Reno, Nevada
and is a Rich Dad Advisor. ®
56
n entity is a separate legal
being, such as a corporation,
Limited Liability Company
(LLC) or Limited Partnership (LP).
All provide much greater asset protec-
tion when compared to a sole propri-
etorship or general partnership. It is
the ‘separateness’ of an entity which
protects you – the entity’s owner –
from unlimited personal liability.
Without that separation, if an an-
gry customer sues you, any assets you
own such as your house, car or bank
account can all be taken should a judg-
ment (court case) be entered against
you.
An entity is a business organized
according to state law to limit the li-
ability of the owners.
But, an entity can’t protect you if it
is not set up right at the start. Further-
more, it can’t protect you if you don’t
properly maintain your entity over the
long term.
When looking to start a business or
protect investments you have several
options in the type of entity you can
form. As with anything, there are ad-
vantages and disadvantages to limited
liability companies. On this page is a
list of advantages when considering
the formation of an LLC.
DECEMBER 2017/JANUARY 2018 SA Real Estate Investor Magazine
THE ADVANTAGES OF
AN LLC
• It limits liability for manag-
ers and members.
• Superior protection via
the charging order. (See
page 4.)
• Flexible management.
• Flow-through taxation:
profits are distributed to
the members, who are
taxed on profits at their
personal tax level. This
avoids double taxation.
• Good privacy protection,
especially in Wyoming.
• This is a premier vehicle
for holding appreciating
assets, such as real estate,
stock portfolios, and intel-
lectual property.
• Extraordinary flexibility in
the ability to allocate prof-
its and losses to members
in varying amounts.