Should I create 2 businesses? One for store & one just for real estate?

I鈥檓 currently renting a retail space for my store and am now looking to purchase commercial real estate to run my store in. I was advised to create a new business (such as 鈥淟ast Name Properties鈥? just for the real estate and basically pay myself rent from my current business. Does anyone have any experience or an understanding of how this may be advantageous?

The reason to form an entity for your business is to limit the liability if you are sued or if the business fails. You want to have the real estate outside of that business so that you don't loose it if you are sued or the business fails. You should set up an LLC or a corporation to own and operate the business and then own the real estate personally. The business would pay rent to use the real estate and that rent would be income to you. If it is a pass through entity, such as an LLC that elects to be taxed as a partnership or an S Corporation, then it has no net tax effect to you. The rental income is offset by the rental expense flowing out of the pass through entity.

Good luck with your business.

Jim Kirby, CPA/PFS, CFP, CFS

you sound like ur goin all the way

cut your expenses and get paid

The advice you got is sound in terms of if, God forbid, one goes bankrupt. One still will earn income and the other will take a loss. That means asset on one cannot be take from the other if they are separate entities.

The only problem there is just there are lots more paper work for taxes and all. But financially, it is better in the long run.

Don't forget about income taxes! You'll end up having to pay tax on all the money you're "paying" yourself. Just a thought...

that's more for tax reasons it sounds like