April, 2022 | Obront Law

When it comes to property ownership, there are two types of properties – real property and personal property. Many individuals use these terms interchangeably, but they are not the same. Real property is immovable, and personal property is movable. In this article, we will dive deep into real property and personal property, their differences, and similarities.

Real Property

Real property is fixed, immovable property. It includes land, buildings, and anything that is permanently affixed to the land or building, such as trees, wells, and fences. Real property is also called real estate, and it is the most significant investment that most people make in their lifetime.

Real property ownership comes with rights such as leasing, selling, renting, and using the property for personal use. As an owner of real property, one can sell, mortgage, or donate the property.

Personal Property

Personal property, on the other hand, refers to movable property that can be transported or removed from one location to another. Examples of personal property include furniture, electronics, vehicles, artworks, jewelry, and clothing, among others.

Unlike real property, personal property can be sold, exchanged, and gifted privately without involving the government authorities. However, when it comes to selling personal property that has accumulated value or a significant amount of wealth, the government may impose taxes on the transaction.

Differences between Real Property and Personal Property

The most apparent difference between real property and personal property is that real property cannot be moved, while personal property can be. Real property is permanently attached to the land or building, while personal property can be transported freely.

The second difference is the way each type of property is viewed, regulated, and protected under the law. Real property is subject to real estate laws, while personal property is subject to personal property laws.

The third difference is that real property can appreciate or depreciate in value, depending on various factors such as the land, location, and condition. Personal property, on the other hand, generally depreciates in value over time.

Similarities between Real Property and Personal Property

Despite their differences, real property and personal property share some similarities. Both types of property can be owned, transferred, and leased, and both can be used for personal or investment purposes.

An individual can also use both real property and personal property as collateral for a loan or mortgage. As an owner of either real or personal property, taxes must be paid, and insurance must be maintained.

Understanding the differences between real property and personal property is essential, particularly when it comes to buying or selling property. Real property is an immovable property that includes land, buildings, and permanent fixtures, while personal property is movable property such as electronics, clothing, and furniture. Each type of property has its characteristics and regulations, and as a property owner, it is vital to be familiar with both. By knowing these differences, you can make informed decisions when it comes to buying, selling, and maintaining your property.

As a business owner, choosing the right legal entity is crucial in determining your company’s structure and financial liability. Legal entities provide a framework for your business, which affects the way you manage finances, allocate profits and losses, and operate within the law. Here are the different types of legal entities you should know about.

Sole Proprietorship

Sole proprietorship is the most straightforward business structure, where the owner controls everything and is personally liable for all debts and obligations of the business. For small, simple enterprises with limited financial risks, this structure is ideal, as you do not have to file a separate tax return or keep separate business records from personal finances.

Partnership

Partnerships are similar to sole proprietorships but have two or more owners sharing profits and liability. Partnerships can be structured as general partnerships (where all partners have an equal say) or limited partnerships (where some partners have limited control over the business). In a partnership, each partner reports their share of profits and losses on their tax returns.

Limited Liability Company (LLC)

LLCs offer personal liability protection and mitigate risks associated with operating a business. This structure provides flexibility in business management, and LLCs are independent entities separate from their owners, with separate tax identities. Members of an LLC report their share of profits and losses on their individual tax returns.

S Corporation

S corps taker personal liability protection a step further, while also allowing for tax benefits. This entity type is owned by shareholders, who are taxed individually on their share of profits and losses. S corps also offer the possibility of electing different taxation methods, such as pass-through taxation or double taxation, depending on the needs of the business.

C Corporation

C corps are larger businesses with complex business structures that offer shareholders limited liability protection. For companies that intend to raise capital through public shares, a C corp is the most ideal structure. However, C corps face double taxation, with profits taxed at the corporate level and again on shareholders’ earnings.

Whether you are starting a new business or restructuring your existing one, understanding the types of legal entities available is essential. Each structure has unique advantages and disadvantages, so seek professional advice on the best suited option for your business. Choosing the right legal entity plays a critical role in achieving your business goals, protecting your assets, and ensuring compliance with legal requirements.

April 2022

Understanding the Difference between Real Property and Personal Property

Demystifying the Different Types of Legal Entities for Businesses