Establishing a Real Estate Company
Establishing a business is one of the most important and difficult decisions to make as it would require a lot of efforts and resources besides committing time and energy. A good start up business must ensure that it has completed its planning phased meticulously involving different aspects of entering into the market. The entrepreneurial abilities require that the entrepreneurs besides showing their creativity and innovation also need to plan their business in better way so that at the time of start up of the business, all the required resources are present.
In order to start a company, it is necessary that it fulfills certain parameters in order to give a new business a proper shape and form. For this purpose, it is necessary that the firm must have a legal shape, a legal form. This legal form of the organization can be in the form of sole proprietorship, partnership, Limited Liability Company or a public limited company. The legal form of the entity depends upon the liability which owner of the business is willing to take. This also depends upon as to the level of access to the funds available to the business to start.
Further, the acquisition of funds is another major important variable which is of critical importance because it ensures that business get the requisite financial resources to effectively incur capital expenditure in order to acquire the important resources such as offices, plant and machinery etc to start the business. For a real estate company, it also becomes important to decide what type of properties to invest and in what proportion so that a risk free portfolio of assets can be built.
Deciding upon the city to invest to get a maximum return is also one of the critical factors too because location plays a great role in making wise investment decisions. This research paper will undertake a detailed analysis of how to form a real estate company by taking into considering factors mentioned above. Choice of Entity There are different ways of forming an organization to start doing business. Most of the legal forms of the business depend upon the degree and involvement of the sponsors into the business.
Much bigger the business, more resources would be required which ultimately would decide upon which form the business can take. Sole propertiership is one f the earliest forms of business as the owner or the sole propertiers takes all the risk and rewards of the business. However, a sole propertier is also exposed to all the risks including his personal property because in case of the default, all the personal property of the owner of the business can also be subject to attachment with its debts. Sole Proprietor however is simple to form as there are no complex legal requirements to form the same.
(Bennett, 2008) Partnership is another option to go for as it is somewhat more sophisticated method of forming an organization. Partnership is considered as a relationship between one or two persons to carry out a business for a lawful purpose. However, like sole trading concerns, partners of the partnership are also personally liable to pay off the debts of the firm and in case of the death of the partners, partnership may cease to exist. It is also however, important to note that there are limited partnerships also allowed under different laws, especially in UK.
Similarly forming a corporation is also another option available to form a company however, corporations are much bigger in size, and it is sometimes difficult to bear the cost of forming such a huge organization. There are various modes of forming a business’s legal form however one of the most important legal forms to start with is the formation of a limited liability company. A limited liability company is one in which shareholders’ liability is restricted to the percentage of their shareholding in the company.
A sole trader or partnership carry unlimited liability on the part of the owner as well as partners in which their personal property is liable to the business’s debts also however in case of limited liability company, law has provided a shelter to the shareholders and officers of the company that their liability is limited to their shareholding in the business. Therefore, as long as the company operates under the law and within its legal boundaries, shareholders’ personal assets are not liable. It is due to this reason we propose to form a private limited company to set up a real estate business.
One of the most important benefits of this is the fact that liability is limited in nature however on the death or separation of a shareholder from the company, the shares are transferable in nature and company does not cease to exist as in the case of sole trades and partnerships. Apart from that being a private limited company would also provide us necessary flexibility also. It is due to the fact that as a private limited company we would not be required to offer our shares in public therefore we would be able to get necessary flexibility to operate without too many demands from our shareholders. (Kennedy,2008).