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Intermediate terms

Essential Entity Structuring & Asset Protection Terms

This curated collection includes key terms that might be helpful when exploring entity structuring and asset protection. It covers the foundational legal structures and strategies investors use to legally own property and safeguard personal finances from investment risks. These terms were selected based on common questions and areas where investors often need clarity.

Learning Path

1

Umbrella Insurance Policy

An Umbrella Insurance Policy provides additional liability coverage beyond the limits of standard insurance policies, protecting personal assets from large claims and lawsuits.

Beginner3 min
2

Personal Guarantee

A personal guarantee is a legally binding promise by an individual to repay a business debt if the business entity defaults, exposing the guarantor's personal assets to the loan obligation.

Intermediate18-20 min
3

Limited Liability Company

A Limited Liability Company (LLC) is a business structure that protects its owners' personal assets from business debts and liabilities, while offering flexible taxation options.

Intermediate13-14 min
4

Piercing the Corporate Veil

A legal doctrine allowing courts to disregard the limited liability protection of a corporation or LLC, holding its owners personally responsible for the entity's debts or actions, typically due to abuse of the corporate form.

Intermediate5-6 min
5

Real Estate Trust

A real estate trust is a legal arrangement where a property owner transfers title to a trustee, who holds and manages the property for the benefit of designated beneficiaries, offering advantages like privacy, asset protection, and streamlined estate planning.

Intermediate15-18 min
6

Series LLC

A Series LLC is a legal entity structure allowing for multiple, distinct "series" within a single LLC, each with segregated assets and liabilities, offering enhanced asset protection and administrative efficiency for multi-asset portfolios.

Advanced5 min
7

Operating Company

An Operating Company (OpCo) is a legal entity established by real estate investors to conduct the active, day-to-day management, leasing, and maintenance of properties, distinct from entities that merely hold asset ownership.

Advanced5 min
8

Limited Partnership

A business entity composed of at least one general partner (GP) who manages the business and assumes unlimited liability, and at least one limited partner (LP) who contributes capital but has limited liability and no management authority.

Intermediate14-18 min
9

Asset Segregation

Asset segregation is a legal and financial strategy for real estate investors to separate personal assets from investment assets, or to segregate different investment properties from each other, primarily for liability protection and risk management.

Intermediate5 min
10

Registered Agent

A Registered Agent is a designated individual or entity responsible for receiving legal and tax documents on behalf of a business entity, such as an LLC or corporation, in the state where it operates.

Beginner2-3 min
11

Fraudulent Conveyance

Fraudulent conveyance is a legal term for transferring assets, often real estate, to a third party to avoid creditor claims, either with intent to defraud or under circumstances of insolvency and inadequate value.

Advanced5 min
12

C Corporation

A C Corporation is a legal entity separate from its owners, subject to corporate income tax on its profits, and then again to personal income tax when profits are distributed to shareholders as dividends.

Intermediate5 min
13

Pass-Through Entity

A business structure, such as an LLC or S-Corp, where income, losses, deductions, and credits are passed directly to the owners' personal income tax returns, avoiding corporate-level taxation.

Intermediate2 min
14

Charging Order

A legal remedy obtained by a creditor to seize a debtor's interest in a partnership or LLC, allowing the creditor to receive distributions without becoming a member or partner.

Advanced5-6 min
15

Commercial General Liability (CGL)

Commercial General Liability (CGL) insurance protects real estate investors from financial losses due to third-party claims of bodily injury, property damage, and personal or advertising injury occurring on their commercial properties. It covers legal defense costs and damages up to policy limits.

Intermediate5 min
16

Corporate Formalities

Corporate formalities are the legal and procedural requirements that corporations and LLCs must follow to maintain their legal status, ensure limited liability protection for owners, and operate as distinct legal entities.

Intermediate5 min
17

Holding Company

A holding company is a corporate entity that owns controlling interests in other companies or assets, primarily used in real estate for advanced asset protection, liability segregation, and tax optimization across a portfolio.

Advanced6 min
18

S Corporation

An S Corporation is a federal tax designation for eligible domestic corporations that allows profits and losses to be passed directly to the owners' personal income without being subject to corporate tax rates, avoiding double taxation.

Intermediate5-6 min
19

Corporate Veil

A legal concept that separates the liabilities of a business entity from its owners, protecting personal assets from business debts and lawsuits.

Intermediate5 min
20

Asset Protection

Asset protection involves legal strategies and structures designed to safeguard an individual's or entity's wealth from potential claims by creditors, lawsuits, and other liabilities, particularly crucial for real estate investors.

Intermediate15-18 min
21

Sole Proprietorship

A sole proprietorship is the simplest business structure where an individual owns and runs an unincorporated business, making no legal distinction between the owner and the business itself.

Beginner2-3 min
22

Liability Insurance

Liability insurance protects property owners from financial losses due to claims of injury or property damage caused to others on their property, covering legal costs and settlements.

Beginner2-3 min
23

Operating Agreement

A legal document outlining the ownership, management, and operational procedures of a Limited Liability Company (LLC), crucial for defining member rights and protecting personal assets in real estate investments.

Intermediate12-13 min
24

Double Taxation

Double taxation is the taxing of corporate profits at the entity level and again when those profits are distributed to shareholders as dividends, significantly impacting net returns for real estate investors using C-Corporations.

Intermediate2-3 min
25

Limited Liability

Limited liability is a legal protection that shields an investor's personal assets from the debts and liabilities of their business, typically achieved by operating through a separate legal entity like an LLC or corporation.

Beginner2-3 min