THE REALTTORNEY

Insights of a Real Estate Attorney

STEP THREE: CHOOSING THE RIGHT BUSINESS STRUCTURE

Posted by Atty. Jojo on January 25, 2012

“…select the business format that reflects your needs and circumstances. Then… become acquainted with the logistics and procedures for the format you have chosen.

– Steve Marr

By Ernesto C. Perez II

Currently, most licensed real estate service practitioners practice their profession on their own. It’s a form of business called single proprietorship. It is easier to set up and you are your own boss and not accountable to anyone else.

The disadvantage of being on your own is that the growth of the business is limited by your financial capacities. Also, since we all have the same twenty-four (24) hours in a day the deals you can work on are likewise limited to how you can effectively manage your time. The demands on the owner’s personal time is so much more demanding.

But, I want you to consider the possibility of entering into a partnership with fellow licensed real estate service practitioners. Because of RESA, we can now choose to enter into general professional partnerships with our fellow licensed real estate service practitioners and register the same with the Securities and Exchange Commission (SEC). It is the same with that of accounting, engineering and law firms.

Setting up a partnership is also quite easy. You can have more resources – time and financials – depending on how many partners agree to join the partnership. If you choose this form then you must learn the Law on Partnerships under the New Civil Code of the Philippines.

The main disadvantage of a partnership is that a rift between any of the partners may cause the dissolution of the partnership. Another disadvantage is the equal profit sharing despite unequal attention and time given by the partners to the business of the partnership.

The last form of business licensed real estate service practitioners may choose as their vehicle for business is a corporation. If the service that will be provided by the group is more than the usual brokerage or if the professionals would want maximum potential for business growth in the chosen market segment then a corporation may be the best form of business.

In a corporation, you need at least five (5) individuals to form one. The good thing is that the liability of each stockholder is limited to his share in the capital, unlike that of a partnership and most especially that of a single proprietorship.

Furthermore, petty quarrels or differences will not dissolve the corporation unlike that of a partnership. There is an increased chance that the group can all help together to consummate more transactions compared to a single proprietorship and partnership.

Finally, it can be said that a corporation provides a better tax shelter for individuals in comparison to sole proprietorship and partnerships.

However, the process of setting up a corporation is more tedious than the first two business forms we discussed above. Also, earnings from a particular transaction may not be immediately “cashed in” by the stockholders. They need to undergo another tedious process of declaring a cash dividend. For that, a lawyer must be consulted to prepare the necessary documents.

So, whatever particular form of business you choose to practice our profession one thing is certain, the level and quality of service we provide will be the ultimate barometer of success.

For further tips on the choosing the appropriate business type you can read the book of Steve Marr, the Author of “Roadmap to Success: Building Your Business God’s Way.”

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