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What's Your Type?

Buying business real estate? The legal entity you choose could make a big difference in your tax bill.

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This story appears in the January 2004 issue of Entrepreneur. Subscribe »

While location will always be important when buying ,tax experts say don't neglect to carefully consider the type ofbusiness entity you select to own that . That'sright-for real estate, you should choose a businessentity that will help you save on taxes.

It's almost never a good idea, for example, to use acorporation for the real estate you expect to own in your businessbecause it will likely cost you plenty in taxes, says MauryGolbert, a partner with the accounting and advisoryfirm Berdon LLP. As you know, with a corporation, earningsare subject to double . First, the corporation pays taxeson income, and then after-tax income is taxed again when it'sdistributed to shareholders in the form of dividends. Thecorporation must also pay state and city taxes in manyjurisdictions on income from rental real estate.

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