A holding company is a legal entity that is used to isolate one or more properties from an investor’s other assets, making it harder for a creditor or a plaintiff to repossess (or be awarded) their property. In addition, the separation that a holding company provides often makes things easier from a financial reporting and taxation standpoint. From a liability perspective, it’s almost always a good idea for an investor to start a holding company, rather than to personally own a piece of real estate or to hold it in a company with a variety of other assets. Most commonly found in the form of a limited liability company (LLC), a holding company protects an investor’s assets by placing everything of importance regarding the ownership of a commercial real estate asset under its name instead of the investor’s. This typically includes all of the asset’s relevant ownership and financing documents such as the deed, contract, and any active mortgages.

Holding companies help reduce a commercial real estate investor’s risk profile and the potential liabilities they could incur as a result of owning an investment property. In order to minimize risk, a holding company isolates one or more properties from an investor’s other assets, making it harder for a creditor or a plaintiff to repossess (or be awarded) their property. In addition, the separation that a holding company provides often makes things easier from a financial reporting and taxation standpoint. From a liability perspective, it’s almost always a good idea for an investor to start a holding company, rather than to personally own a piece of real estate or to hold it in a company with a variety of other assets.

Holding companies are often deployed as a hedge against liability. Usually, if any legal actions are pursued relating to a property, those charges would typically fall on the owner of said property. As an illustration of this, consider: Should someone slip and fall while on the grounds of an industrial complex, they may choose to file a lawsuit against the owner of the property — and more often than not, the owner of the asset would need to compensate the victim, possibly putting personal assets at risk. With a holding company as the owner of industrial property, payment would be the responsibility of the holding company — not risking the personal wealth of the investor.

Liability aside, holding companies can also present investors with some interesting tax benefits. For starters, holding an industrial real estate asset under a separate legal entity makes separating business finances from personal finances substantially easier when it comes to filing taxes. Additionally, there are a few significant business income tax deductions investors may be able to reap by operating via an LLC in some states — adding to the plethora of deductions industrial real estate property typically owners enjoy such as asset depreciation, property taxes, and insurance.

Investing in a holding company in industrial real estate can help reduce risk by isolating specific properties from any other assets. However, there are still risks associated with this type of investment. These risks include potential liabilities, financial reporting and taxation issues, and the potential for creditors or plaintiffs to repossess the property. Additionally, investors should be aware of the potential for fraud or mismanagement of funds, as well as the potential for the holding company to become insolvent.

Sources:

• Commercialrealestate.loans
• Apartment.loans

Investing in a holding company in industrial real estate can help reduce risk and potential liabilities for commercial real estate investors. According to Commercialrealestate.loans, the separation that a holding company provides often makes things easier from a financial reporting and taxation standpoint. Wages paid to employees and independent contractors, as well as professional fees, are tax deductible on Schedule E of the tax return. If you pay an independent contractor more than $600 in a single calendar year, you will have to send and file 1099s for them.

In order to set up a holding company in industrial real estate, you will need to choose a legal entity such as an LLC, C corporation, or S corporation. It is essential to have an ironclad operating agreement before signing the papers on your new real estate holding company. The operating agreement should include percentage ownership interests for each member, members rights and responsibilities, delegation of management responsibilities, and voting rights. For more information, please see Commercialrealestate.loans's article on Holding Companies in Commercial Real Estate.

The best practices for managing a holding company in industrial real estate are to have an ironclad operating agreement before signing the papers on your new real estate holding company. This agreement should include percentage ownership interests for each member, members rights and responsibilities, delegation of management responsibilities, and voting. It's also important to isolate one or more properties from an investor’s other assets, making it harder for a creditor or a plaintiff to repossess (or be awarded) their property. Additionally, the separation that a holding company provides often makes things easier from a financial reporting and taxation standpoint. For more information, see Commercialrealestate.loans.