Real estate investors want to avoid unnecessary taxation, and while there are many clever ways to reduce your effective tax rate, it can be difficult to simultaneously achieve robust asset protection. That’s because accountants and attorneys each have knowledge gaps that prevent them from seeing the full picture, according to Riley Neilson, real estate investment manager and founder of Flying ‘N’ Group. His business brings together lawyers and CPAs to help his clients achieve the delicate balance between minimal taxation and maximum asset protection.
Liability lawsuits against businesses are increasing in number and severity year-over-year, with businesses now spending an average of $1.2 million each year to counter litigation. Mom-and-pop real estate businesses are not immune, even those that do everything by the book, work to reduce risks and never cause intentional harm.
Before committing to a tax strategy, it’s important to consider how a lawsuit might impact your business and take precautionary measures to ensure your portfolio won’t be swiftly seized in the event of an accident. “The overall goal is to not own your assets and only control them. You want to make it so that the paperwork of your assets cannot lead to you,” says Neilson.
Can Real Estate Investors Avoid Lawsuits?
With the right asset protection strategy, it’s possible to prevent most lawsuits—more on that later. But you can’t avoid lawsuits simply by doing the right thing. “There’s a misconception that the only people who find themselves in lawsuits are people… who have wronged other people, and that’s absolutely not true,” says Neilson. If there’s money to be made from your business, victims of accidents may allege negligence—and not just to cover their losses.
There are several reasons why the digital age is conducive to an increasingly litigious culture. One is that personal injury attorneys are advertising to consumers…