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Should Realtors Create a Business Entity, like an LLC?

Almost every Realtor misses this critical step when becoming a Realtor!

I’m beginning to see an underlying theme among Realtors, it’s that you don’t actually own a business. You’re in business, you’re doing business, but you do not own a business. And if you don’t own a business, then you don’t own any business assets, whether it be marketing assets like content, branding, emails, videos, social media, client information, etc. But even more seriously, not having a formal business entity puts you in a position of vulnerability by creating a scenario where your personal assets, liabilities, and debts are all commingled.

Protect Your Personal Assets and Your Business Assets!

Performing business as an individual means you are seen as a separate money making operation from your brokerage, you are an independent contractor. You’re an “unofficial business owner” leaving yourself at risk for all sorts of liability, and potentially leaving cash and opportunity on the table.

I’m Brit! I am the founder and owner here at Forever Home Inspection. Educating and empowering my community is a major passion of mine. I hope you found this article useful. I wrote it in response to the many conversations I’ve had with Realtors abo… — I’m Brit! I am the founder and owner here at Forever Home Inspection. Educating and empowering my community is a major passion of mine. I hope you found this article useful. I wrote it in response to the many conversations I’ve had with Realtors about the “business of what they do”. I hope this information brings clarity and confidence to YOUR business!

Before I launch into more specifics on this, let me just say, creating a business entity is very simple and very quick. You can do it in less than an hour and for roughly $100. I mean, this is a no-brainer, friends. There are some really helpful links at the end of this article for Oklahoma Realtors!

There are some obvious reasons for Realtors to create a business entity:

You get an EIN, this is basically a social security number for your business. An EIN allows you to open business accounts, this separates your business cash flow and expenses from your personal cash flow and expenses, allowing you more flexibility and a greater degree of protection in both arenas. Not to mention that every CPA will tell you, commingling funds is a major no-no!
You’ll be growing a credit rating for both you and your business. This is helpful when you want to take a big leap in business and you need a small business loan, but you don’t want that debt appearing on your personal credit report. Think about it like this, don’t want to be choosing between buying your own home and growing your own business!
You’ll maximize your tax flexibility. Deductions, deductions, deductions! Odds are, you are seriously missing out on some major tax deductions. Here’s a fun one, did you know that your children can be brand ambassadors for you? Yep, that’s right! This seriously opens up deductions for your entire household. Wait there’s more, did you know you can also make your children w2 employees in your company, that’s a major tax sheltering strategy for many companies.
It sets you up for that pivot that every Realtor dreams of making, being a broker owner, or having a team of your own. This leveling up requires a business entity already in place, so why not plan ahead, and get this out of the way now? Plus, you’ll be giving your EIN time to build credit, because you might need to borrow a little, or a lot of capital to get started.

A business entity, like an LLC, is a great strategy for Realtors because it serves as a shield separating your personal interests from your business endeavors. But it also legitimizes your business in the eyes of your clients, other businesses, and the IRS.

*Legal side note: I am not a tax attorney, cpa, nor do I work in financial services in any capacity. I am speaking only from personal experience on this matter and I recommend that you consult a licensed professional when implementing these strategies.

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[Owner, Lead Home Inspector, Real Estate Instructor]