How to Incorporate a Real Estate Business

Incorporating your real estate business can result in giving you peace of mind. The top 3 reasons to incorporate are in your favor and are therefore, highly recommended. They are:

1. To reduce the business liability. Real estate deals usually involve exchanging large sums of money over a period of time. If a deal goes wrong, you could be personally liable.

2. In estate planning, if your business is incorporated and owns properties in many states, your heirs will only need to go to probate court in one state. This is because you have converted the real estate into the personal property of stocks.

3. You can sell shares of stock to raise capital for your business.

Simple Step-by-Step Incorporation Actions for New Businesses

Below are the very basic steps you can take in order to incorporate your business. I do caution you to seek legal advice from a licensed attorney prior to carrying out any incorporated business status changes in your company.

1. Obtain the "Articles of Incorporation" form. The Secretary of State office in your city will have this form.

2. Obtain the "Original Appointment of Statutory Agent" form. The Secretary of State office in your city will also have this form. The Statutory Agent is either you, your lawyer or another third party. He or she must be available during regular business hours. The Statutory Agent's role is to receive and forward all legal documents including state correspondence on behalf of the business. Since your business is now seeking incorporation a Statutory Agent must be appointed.

3. File both of the above forms with your Secretary of State office. In Ohio, to incorporate a non-profit company the filing fee is only $25. For-profit businesses the filing fee is $85. Research to find the appropriate filing fee amounts for your state by visiting the Secretary of State office in your city.

4. Create the Corporate Bylaws document. Keep this document in your office. It will list the "rules" of your company. Indicating when shareholder meetings will be held, who can vote and how many shareholders will be notified of special meetings. Your Corporate Bylaws document must list when you hold your annual meetings. There are additional forms that you may need to fill out formally stating that these meetings can be conducted by written agreement and not necessarily face to face. Every time property is purchased or sold, shareholders must be notified. Click here to see an example of a Corporate Bylaws document.

For Existing Real Estate Businesses Who Want to Incorporate

If your real estate business is already functioning as a sole-proprietorship or partnership and you are ready to incorporate, you have to decide if you will be transferring any assets to the new corporation. Among other things, any business contracts in existence before your incorporation will still be in effect under your former business status---unless you notify those contact holders and create new employment / contracts. It is best to consult with a lawyer in this type of transition because there may be some loose ends that only an attorney will know about. He or she is skilled in determining exactly what forms your company needs based on its' previous, current and proposed new status.

Incorporating your business is not hard. Any business who regularly makes high-value investments should strongly consider "incorporated" status to lesson personal liability. This group includes businesses who frequently engage in the property-money exchange such as real estate, which by its very nature has the potential to produce unlimited sky-scraping financial gains that suppress, but never dispel the uncertainty of unknown risks.

[1] http://www.inc.com/articles/1999/10/14610.html