3.5 Business Entity Recommendations

CHAPTER 3

• Credibility: Forming an LLC may help your VRP business be perceived as a more legitimate business than a sole proprietorship or general partnership.19

3.5 Business Entity Recommendations

Think about all of the things that you pay for with your home. From debt service to maintenance, to everything you buy to decorate your space to the cleaning supplies, the lawn mower, the gas for the lawn mower. Every single thing you do with that home, every single thing is an expense-able item when it becomes a VRP. This is why you create the corporation. Now, you are set up to see great cash fl ow but operate at a loss because of all that stuff . It is a great tax position to be in.

From a tax perspective, your VRP is a business with a lot of tax-deductible items—a giant array. Now, would you like to manage and keep track of all of those items yourself? That can get pretty complicated. But when you work with a professional third-party management company, you’ll have a report handed to you at the end of the year: “Here. You can use this for your taxes.”

It is not wise to operate your VRP as a sole proprietorship. I simply added sole proprietorship to this chapter so that maybe people will look at it and go, “Oh my God. I’ll never do that.” I’ve lived in 14 countries, and nobody puts anything in their name when they’re buying property. It’s just common. In Costa Rica, when you transfer a piece of paper, there’s no title. None. Instead, you sign over the shares of the corporation that owns that piece of property. It’s done in fi ve minutes. There’s aren’t all these closing costs and things like there are in the United States.

If you own something in your own name, you are putting your fi nancial future at risk. Why? Because if somebody trips over

19. https://www.bizfi lings.com/starting-your-business/business-types/limited-liabilitycompany Accessed June 27, 2019.