As a business owner, you are probably registered in your state as an LLC, an S Corporation, or a C Corporation. No matter what kind of business entity you have established, it is a good idea to take a second look at forming an LLC to protect your interests when you buy commercial property.
Similar to how your current business structure protects against liabilities and helps you maintain your finances, an LLC provides benefits for buying commercial real estate. The LLC structure has advantages that other common business structures do not.
What Is an LLC?
An LLC or “limited liability company” is a business entity composed of individual members. Membership in the LLC safeguards the members against liability. Likewise, having an LLC separate from your existing business means that the company’s assets cannot be threatened in the event of default on a mortgage loan.
An LLC operates as a “mix” between a partnership and a traditional corporation.
LLCs have their own banking information, tax ID number, and assets. They conduct transactions, including real estate buys, under their own name. Since the LLC pays for purchases using its own funds, all ownership questions around the property crystal clear.
What Are the Advantages of an LLC When Buying Commercial Property?
Containing liability within an LLC is a smart move for individual investors and the business that benefits from the property. Claims against the property are contained within the LLC, which might enable the occupant’s business to continue even if difficult circumstances arise.
LLCs provide an extra layer of privacy for certain essential information that would otherwise be easy to obtain through a public records search. It may be easier to obscure personal addresses, exact sales prices, and other details you might prefer to keep to yourself.
What if you decide to sublease part of your commercial property? An LLC handles profits a bit differently. Owners report earnings on their personal tax returns, leading to thousands of dollars in annual tax savings overall.
- Passing it On
Investing in commercial real estate is a way to put down roots in a community. When you plan the next generation of your business, an LLC makes it easy. Simply ensure that operating members of the business are full shareholders within the LLC.
- Proven System
LLCs have are used in the real estate market and have existed for many years. Banks and other stakeholders well understand them in the process. Approximately 20 percent of second homes are owned under the banner of an LLC. Naturally, they are also common when a commercial property is involved.
The SBA 504 Loan Program Can Help You Achieve Your Real Estate Goals
Are you still searching for ways to finance your commercial real estate purchase? The SBA 504 loan program could be right for you. Established by the Small Business Administration and provided by Certified Development Companies such as TMC Financing, the SBA 504 loan is the most advantageous way to buy owner-occupied commercial properties.
With TMC Financing’s SBA 504 loan program, small business owners can buy commercial real estate or other fixed assets at below-market, long-term, fixed interest rates. All loans are fully amortized over 25 years. There are no balloon payments.
Most for-profit businesses in the U.S. are eligible for the SBA 504 Program. Low down payments make the program even more attractive, with most businesses eligible for just 10% down. There is no maximum loan amount, no additional collateral, and you can even finance soft costs such as closing costs.