I was reading a thread online this week in which a real estate professional was questioning why an investor would create a company instead of running a sole proprietorship using their own name.
That’s a great question. And for many real estate professionals, it could be somewhat confusing because we see a lot of brokerages named after their owners. Take one of the biggest names in realty today: Keller Williams.
According to Wikipedia, Gary Keller and Joe Williams founded the company as a single office in Austin Texas in the early 1980s. They specialized in selling residential real estate. By 1990, they had expanded outside their home state, and in 1991, were selling Keller Williams franchises.
In 2012, Keller Williams went international and awarded franchises to brokers worldwide from Vietnam to the United Kingdom. According to the Keller Williams website, kw.com, they currently have over 975 offices and 186,000 associates.
Those are some pretty impressive business statistics. And if I were a realtor, I’d want to study this company and emulate it as much as possible.
With that in mind, it sounds like you’d want to do business in your own name. Right?
The name Keller Williams is a little misleading because Gary and Joe weren’t doing business in their own names; they actually decided to incorporate. The full name of their company is Keller Williams Realty Inc. That name just happens to bear the founders’ names in the same way Sam Walden’s name is in Walmart. Nevertheless, because it’s a corporation, the company is totally separate from Gary and Joe personally.
So why do that?
There are three main reasons, in my mind, that a business should establish itself as a corporate entity. No.1 would be to use specific tax treatments under the entity structure that is most advantageous to the company. For instance, as an investor you probably hold your rentals in an LLC. But if you are flipping property, there are more tax advantages when you organize your company as an S-corporation.
No.2 would be for asset protection. By having an LLC or an S-corporation own the properties, you create a barrier called the cooperate shield between your personal life and your business assets. So, if someone sues your business, they’ll have difficulty getting to your personal property.
No. 3 is to create a brand that can grow larger than yourself. Take Century 21 and RE/MAX. They are both large realty companies with names that don’t reference their founders but rather convey a message. RE/MAX: Real Estate to the Max.
At the end of the day, the name of your company doesn’t mean anything. But your company’s name means everything. Let me explain.
You can spend lots of time trying to come up with the perfect name that conveys a great message. Ashley and I thought long and hard about the name Focus Property Solutions. We felt that name would tell people what we could do as investors. We focus on sellers’ property problems and give them viable solutions.
It didn’t take long for us to realize that our company name didn’t convey a strong message that we were investors interested in buying houses. Instead people assumed we were a property preservation company or realtors one.
Even though the name didn’t work like we had hoped, we had already organized under it and decided to go with it.
I tell you all this so that you don’t waste hours formulating the perfect name instead of meeting with sellers and making deals happen. Because truthfully, you can name your cooperation anything you want. (We know someone who named theirs after their horse.) But in the end, the name you pick doesn’t matter. What does matter, though, is the name your business makes for itself while operating.
Proverbs 22:1 says “A good name is more desirable than great riches; to be esteemed is better than silver or gold.”
The integrity you have, the customer service you provide and your willingness to always do the right thing will be the name you make for yourself and your company.
So, what’s in a name? That’s simple: your character. And people will choose to do business with you and your company based off of that factor.
Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.