You can get a line of credit for an LLC, partnership, or even yourself individually, as easily as for a corporation. It will all be based on the ability of you or the business to use the line in a productive manner – not on the LEGAL structure of the venture.
As far as credibility, again I contend that an LLC would have no disadvantage over a corporation. Also, if you learned to spell “credibility”, that would improve your credibility! (Just joking, didn’t mean to pick on your spelling…)
Bottom line is, if you’re planning to buy and hold houses, you do NOT want to hold them in a corporation.
I’m planning to Incorporate and would like to know if it would be better to transfer ownership of my rental properties to the corporation or to lease the properties to the Corporation. Also I’d like to know if you can suggest some books or software to help become more knowledgable and to assist in operations.
Thank you
Before I answer your question I’d like to ask one of my own: WHY are you planning to incorporate?
There are two main reasons people decide to incorporate: personal liability and tax reasons.
The first, personal liability, can be easily achieved with several more-flexible structures such as an LLC, business trust, or PacTrust. If that were your only reason for incorporating I would advise you not to do it.
Second, tax reasons. Although a corporation can have tax advantages, it can also have tax disadvantages. Generally, income from the ownership of rental property is considered “passive” income by the IRS. For the most part, you do NOT want to transfer passive income into a corporation. For one, if a corporation gets too much of its income from passive activities, its tax status can be jeopardized. A corporation is better suited to “active” activities such as managing rental property as opposed to owning it. Another consideration is that you can only deduct passive losses (e.g. from depreciation) to the extent that they offset passive income. If you have no passive income personally, but rather transfer it all into the corporation, you will lose this tax deduction.
Before you go any further with this plan I encourage you to post more on here about your reasons for wanting to incorporate. It doesn’t sound like your plan is well though out yet and the folks on here can help you with some of the thinking out. It also might be of benefit to talk to a tax advisor for an hour or two to make sure you are doing something that will benefit you.
I realize that I might be alittle premature at incorporating, but what I was wanting to do is develop the Corporation as my business grows (and Growing the line of credit for my business). I am also looking into the LLC and am probably leaning in that direction. A third reason for incorporating is to lend additional creditablilty to the entity from a potential business/customers standpoint. I just wanted some advice on the best way to set it up, and whether or not the corporation should own the houses.
(Just joking, didn’t mean to pick on your spelling…)