Should I create a holding company?

Question

Currently I have a few duplexes already rented and I wanted to know if I should create a holding company.

My first question is do you have to put your deed name under the holding company ? Or can you run the holding company without it.

Two will this be more tax efficient to operate and expense a holding company vs claiming it on my personal income

Jeff V. · Answer

@Jean Claude

First off I'm not a lawyer, just sharing what I have found during my own research.

A holding company is normally formed to funnel all of your other companies, business ventures, joint ventures, passive investments, royalties ect into one entity.  Basically this is the entity that would wholly own all of your other businesses for the purpose to control all of the businesses from one.  Normally used by those who have massive revenues and business ventures going on.

Definition:

holding company

• a company created to buy and possess the shares of other companies, which it then controls.

a company created to buy and possess the shares of other companies, which it then controls.

I'm sure this wasn't your intent, based on how you asked the question.  Sounds like you were trying to ask, now that you have a few assets performing should you move them to another entity such as an LLC.

In my opinion, its much harder to move them after the fact than to purchase them from that entity.  In other words, Its easier to have the LLC setup before hand and purchase the units with the LLC.

However, there are draw backs to have the properties in the LLC and may not be something you want to do unless you have reasons to do so.

For example, it basically disqualifies you from using conventional 30 yr fixed mortgages.  Thats a major blow to the investor just getting started.  It forces you to use commercial financing with larger down payments and shorter adjustable rate terms.

If you don't have a partner, I would just keep in my personal name and maintain adequate insurance to cover the liability.

If you do have a partner, it would be better to have some sort of entity to limit liability.

Talk to your CPA as far as tax strategies go, but it doesn't seem to change a whole lot from my perspective llc vs personal name.  Talk to your Lawyer for liability protection information.

Jeff V