How to Structure Your Assisted Living Business for Maximum Asset Protection and Tax Efficiency

Starting or growing an assisted living business involves navigating complex decisions, particularly when it comes to structuring your company. In this blog, we’ll explore the importance of choosing the right entity structures, which can help protect your assets, reduce your tax burden, and separate your operations from your real estate investments.

The Three Key Objectives of Structuring Your Assisted Living Business
When structuring your assisted living business, there are three primary goals you should keep in mind:

Separate Real Estate from Operations
Create a Plan for Asset Protection
Optimize Tax Management

Separate Your Real Estate from Your Operations
In order to protect your assets, it’s essential to distinguish your real estate from the operational side of your business. This can be done by creating two distinct entities: one for the real estate and one for the operational side. For example, your real estate company, which will own the property and buildings, should be separate from your operations company, which manages the day-to-day functions like caregiving, payroll, and rent collection.

In Brett's case, he uses a local LLC to own the real estate, but it is not owned directly by him or his wife. Instead, a holding company (in Brett's case, a Wyoming entity) owns the real estate entity. This structure offers an extra layer of protection for your real estate assets.

Asset Protection Strategy
The goal of asset protection is to shield your personal assets from potential liabilities associated with the operations of the business. Since most of the risk comes from the operations side of assisted living, having a separate entity for operations and real estate helps mitigate that risk.

Your real estate company holds the actual property, while your operations company carries the risk of day-to-day business, including staffing, caregiving, and managing residents. You can further protect your interests by adding a management company between your operations company and yourself. The management company acts as a buffer, protecting you from personal liability while streamlining your business operations.

Optimize Tax Management
As an owner of multiple businesses or properties, optimizing taxes is key to maximizing your profits. By setting up the right structures, you can leverage tax advantages such as S-corp taxation or disregarded entities that allow you to reduce your tax burden. For example, you might choose to structure your operations company as an S-corp, which can help reduce your FICA taxes by paying yourself a reasonable salary and distributing profits as dividends.

Working with Professionals
While these strategies can be highly effective, it’s essential to consult with your own CPA and attorney to ensure your structure is tailored to your specific needs. Each state may have different regulations, and your personal financial goals will influence your structure.

In Brett’s case, he works with a local asset protection attorney who helped him decide on the right holding company, real estate company, and operations company setup. It’s important that you do the same, getting professional advice before you make final decisions.

Conclusion
By separating your real estate from your operations, setting up holding and management companies, and taking advantage of tax-efficient strategies, you can structure your assisted living business for success. This approach helps protect your assets, minimize liability, and optimize your tax obligations.

If you’re serious about building a strong foundation for your assisted living business, consider adopting these strategies for long-term growth and protection. Reach out to a CPA and attorney to personalize your structure, and watch your business flourish with less risk and more financial freedom.

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