How is a REIT typically structured?

A Real Estate Investment Trust (REIT) is typically structured as a corporation that passes through income to its shareholders. This structure is key to the operation of a REIT because it allows for the income generated from real estate holdings to be directly distributed to investors rather than being retained within the corporation.

By operating in this manner, REITs benefit from certain tax advantages, including a requirement that they distribute at least 90% of their taxable income to shareholders in the form of dividends. This structure is designed to encourage investment in real estate by providing a steady income stream to shareholders, making it an attractive investment vehicle.

The alternative structure mentioned—partnerships—does exist in the realm of real estate investment, but a classic REIT will usually take the form of a corporation to utilize the benefits of a corporate structure while providing limited liability to its shareholders. Non-profit organizations, on the other hand, do not align with the goals of a REIT, which is to generate profit through real estate investment. Thus, the structure as a corporation that passes through income to shareholders is the most accurate representation of how a REIT is organized.