The real estate business can be very profitable when done right. However, there are lots of elements entrepreneurs need to understand to achieve success in this field. Tax benefits, policies, and where to incorporate a business are just some factors vital to know before getting started.
Truth is, the real estate industry is one of the most volatile industries out there. Most struggle to keep their businesses sustainable. It requires investment upfront and can take a while to yield any financial return.
In fact, a lot of real estate entrepreneurs will struggle to keep their businesses sustainable. It requires investment upfront and can take a while to yield any financial return.
But it doesn’t have to be that way for your business. There’s a lot of good news for realtors after a bumpy couple of years - and plenty of thriving real estate businesses to prove it.
To get your real estate enterprise on the same path to success, start with this simple trick: Incorporate your business in Delaware.
Why real estate businesses should incorporate in Delaware
Delaware has consistently been the top choice for Fortune 500 companies. What’s more, ‘The First State’ had 336,407 new business entities registered in 2021 alone. And in the same year, 93% of all U.S. based public offerings chose Delaware as their corporate home.
“To continue making Delaware the premiere destination to incorporate, it's important to ensure that our laws are optimal for engaging in ethical and profitable business,” said Jeffrey W. Bullock, the 80th Secretary of the state of Delaware.
So what makes Delaware a magnet for real estate entrepreneurs planning to incorporate their business?
Read on to find out.
Corporate-friendly tax policies
Unlike other states, Delaware’s tax laws and policies are very corporate-friendly. Delaware is known in the corporate world to have lenient taxes imposed by the state. Companies such as Facebook, Coca-Cola, Amazon, and Google have incorporated their businesses in Delaware.
Some of the benefits are:
- No in-state purchases are subject to tax
- No property tax
- No value-added tax (VAT)
- No tax on royalties
- No state corporate income tax on goods and services for Delaware corporations operating outside of the state
- Lower real estate property tax.
Privacy and asset protection
When you incorporate your real estate business in Delaware as an LLC, you limit liability while protecting your assets. This ensures that your home, bank accounts, and other personal assets are protected in case your business goes south. Moreover, business owners in Delaware have an extra degree of anonymity.
While some states require businesses to disclose their corporate tree, in Delaware the only name that needs to be disclosed is the business’ registered agent. Thanks to the anonymity given by Delaware, directors and investors are not required to reside within the state.
Court of Chancery
Another big benefit for businesses incorporated in Delaware is the Court of Chancery. This is a court that resolves corporate lawsuits unlike the traditional trial system in other states.
All lawsuits in the Court of Chancery are handled by judges who specialize in corporate law. This makes it easier for businesses to predict outcomes. Judges make their decisions after taking into account the business judgment rule.
* Cases handled by the Court of Chancery include anything related to civil rights, commercial litigation, trusts, real property, and guardianships.
Less requirements
Delaware has always been committed to making the lives of business owners a lot easier. Aside from having corporate-friendly tax regulations and the Court of Chancery, Delaware also demands less requirements to start your business.
In fact, Delaware can even register your business on the same day you submit your application. In other states, this process takes anything from 12 to 18 months. To set up your real estate business as an LLC in Delaware, all you need to do is follow these five simple steps:
- 1. Name your business
- 2. Hire a registered agent
- 3. File for a certificate of formation
- 4. Create an operating agreement
- 5. Acquire an Employer Identification Number (EIN)
Final words
Despite being one of the smallest states in the country, Delaware boasts many benefits for real estate business owners. Getting to grips with the advice given in this article will help your business in both the short and long term. Real estate trends are always changing, making it important that you stay one step ahead of the competition.
If you’re an entrepreneur thinking of starting a real estate business in the US, Delaware is the place to go. You enjoy multiple tax benefits, protect your assets, and avoid the hassle of any delay in incorporating your business.
