Best Way to Hold Title to Your Commercial Property

What is the best way to hold legal title to your commerical  property? You can take title in your own name, but you may want to consider forming a corporation or limited liability company (LLC) and putting the legal title in the name of the business entity. Using a corporation as a vehicle for holding title to your commercial real estate insulates you personally from claims against the corporation. However, the legal housekeeping costs might not be the best cost-effective way to limit personal liability. Using a limited liability company to hold title can be a very effective way without the responsibilities of forming and maintaining a corporation. You will be given the benefit of limited liability and also avoid the double taxation of incorporation.

By limiting your personal liability, you limit financial exposure of your other assets and businesses. In other words, you decrease the risk that you could lose your other assets such as your home and personal bank accounts if someone gets hurt on your property and wins a lawsuit against you. Your lawyer can help you decide if putting your commercial real estate into a separate legal entity is the best way to avoid potential financial harm.

Case Studies: Best Way to Hold Title to Your Commercial Property

Case Study 1: Individual Ownership

John, a successful entrepreneur, decided to purchase a commercial property for his new business venture. He chose to hold the legal title to the property in his own name. While this provided him with direct control over the property, it also meant that he was personally liable for any claims or lawsuits related to the property. Unfortunately, an accident occurred on the property, resulting in a costly lawsuit that put John’s personal assets at risk.

Case Study 2: Corporation as a Legal Entity

Sarah and Michael, business partners running a manufacturing company, opted to form a corporation to hold the title to their commercial property. By doing so, they shielded their personal assets from any potential claims against the corporation. However, they faced additional administrative and legal obligations associated with maintaining a corporation, which increased their overall costs and required ongoing compliance.

Case Study 3: Limited Liability Company (LLC)

Lisa, a small business owner, decided to establish an LLC to hold the legal title to her commercial property. This option allowed her to enjoy the benefits of limited liability without the extensive administrative requirements of a corporation. As a sole proprietor, she appreciated the simplicity and flexibility of an LLC structure. In the event of a lawsuit related to the property, Lisa’s personal assets would remain protected.