Incorporation provides protection, flexibility, tax advantages
Q : I’m getting ready to purchase a residential property for investment. My friends tell me I should incorporate or form another business entity to protect my personal liability. Is this a good idea? A : In general terms, yes. It does protect your personal liability so long as you treat it like a business, have meetings and don’t sign anything personally. Your choice of entity is up to you. Most think you have more flexibility and tax advantages as a Texas Limited Liability Company (LLC). Corporations with subchapter S election also can be a good choice. Consult your CPA and attorney to look at how the set-up works. You can also call a company that advertises these services for a fee. We think having an attorney and CPA is a better choice in most circumstances. There will be a lot of questions at first. Q : I heard there are now durable power of attorney forms that have been adopted by the Legislature, and new transfer on death deeds also? A : Oh, yes, along with other new amendments to the statutes. If you’re into any of these things, call your lawyer for updates. You also can download the statutes on line to review them yourself. It is worth the read. Q : I signed a TREC promulgated contract to purchase a home. I got busy and forgot to pay the option money within the three days. Am I out of contract? A : Quite the opposite. What in the heck were you doing for these three days? Read the contract. If you fail to deposit the money, you have no right to terminate the contract during the option period. You now have a binding contract. Congratulations. Q : I bought my house in 2003. I am now selling it, and the title company says I don’t have good title. Something about missing heirs at the time I purchased the property. The new title company won’t insure it. What do I do now? A : This happens more often than you think. The new title company can get an indemnification from the old prior title company. You can also go back to the prior title company. They may have curative documents from the prior closing, or will insure it again to prevent a title claim.
You also have owned the property and exclusively possessed it for over 10 years, so you have an adverse possession defense (sort of like a statute of limitations). Have a talk with the title insurance carrier, as it can usually work these things out.
To send a question visit www. AskGeorge.net and select the “Ask A Question” button. Answers to questions do not contain legal advice. If you wish to obtain legal advice, you should consult your own attorney. George Stephens is the broker of Stephens Properties. Charles J. Jacobus, J.D. is board certified by the Texas Board of Legal Specialization in residential and commercial real estate law.