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LLC Question

#1 User is offline   Mick 

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Posted 27 January 2002 - 06:56 PM

I have some questions about LLC's:

There is a website called BIZCORP.com that will form your LLC, and they guarantee the cheapest price around.  Of course, prices vary per state.

So, do I just get this LLC formed, and then start acquiring my properties under this LLC?

Please provide any knowledge that you have about LLC's.

Thanks,
Mick. :whatsthat:
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#2 User is offline   jflyntok 

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Posted 27 January 2002 - 07:00 PM

Just from what I have read on this board LLC's are more appropriate if you plan to hold your properties long term.  If flipping or rehabs are your game then I think a standard "S" corp for now would get you going.

The "S" corp is what I plan to work under...
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#3 User is offline   Drew 

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Posted 27 January 2002 - 07:19 PM

It is VERY easy to setup your own LLC!

Of course, should you wish to seek professional counsel, by all means do so.

However, personally, I would not pay an Internet company to form it for me.

Cut out the middle man.  At least for North Carolina, all that is needed is $125.  I went to the Secretary of State website, downloaded the forms, read the FAQ and submitted it by mail.  Voila!  Instant LLC.

A proper attorney may help you more and offer advice.  But there is very little an Internet company like this can do that you can not do yourself.

-d
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#4 User is offline   Mick 

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Posted 28 January 2002 - 07:48 AM

Unfortunately, my state is higher (what a surprise for New York).  It would cost me less than $100 (after paying the actual LLC fees) for them to do the service.  I just compared it on the NY website.  Is it worth it for them to just do it, or no?

In addition, once I have my LLC, I would just acquire my properties under my LLC?  Is there anything else I'd need to do?

Thanks for the help,
Mick.
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#5 User is offline   The_Motivated_One 

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Posted 28 January 2002 - 08:10 AM

Last week I went to the Sec. of State offices, filled out 2 forms and paid $85.00 for my LLC.  It was very easy.  The only problem I had, was finding a name that wasn't taken yet.

Just think....  It wasn't too long ago that my first post on this board was asking about LLC's and Corp's!  After reading the archives and talking to the DealMaker, it all became VERY clear!  Come to find out the whole process it 100 times easier than I had imagined.  :angrym:
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#6 User is offline   Rita NH 

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Posted 28 January 2002 - 01:11 PM

I believe NY is one of the states that require publication in newspapers.
Rita
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#7 User is offline   KIDO 

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Posted 31 January 2002 - 10:23 AM

TMO,

Why did you choose an LLC?  Ar you going to concentrate on long term REI right now or flips?  I've read that you need to be careful being an LLC and doing flips, that the IRS can peg you as a dealer and give you all kinds of tax issues.

I'm concentrating on flips first and as we speak (I should say as I type) am calling accounts to look at setting up a meeting to discuss the difference between business entities.  LLCs are definately easy to set up, you fill out a form and you're done.

KIDO
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#8 User is offline   freeman 

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Posted 31 January 2002 - 10:46 PM

I have set up two entities; an LLC and an S corp which work together to meet the needs of my business which does flips as well as holding properties for longer periods of time. I believe this is the best way to meet both of these needs, as well as to minimize tax liability. The S corp actually "owns" the LLC which brings in the income. The LLC then pays the S corp "management fees".The S corp then pays me "dividends" as a member.

As I understand it (and I am still learning a lot myself) this is the best way to manage the business that does flips as well as holds, and to protect the business from both legal and "excessive taxation" problems.

However, I am still quite inexperienced with this and would welcome further insights from the experts!!!   ???

Freeman
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#9 User is offline   FRANZ 

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Posted 12 March 2002 - 04:02 AM

Can I FLIP contracts without a business entity for the first deal? Then establish something? I am too low on $$ to afford to set up something right away? What are the risks? Thanx.
-Pete
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#10 User is offline   Dealmaker 

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Posted 12 March 2002 - 03:48 PM

WHOA!!

There is some incorrect advice in these posts and some structuring that I cannot agree with.... I dont' thinks it's intentional... but let me make a few points.

** LLC can be TAXED as ANY type of entity.

You can have a LLC to be taxed as a partnership (that's the default)... or you may have it taxed as a Corporation, Subchapter S, Sole Proprietor, etc.. You simply have to check the box to designate the taxation of the entity.

There can be tax consequences at the LLC level depending on how you choose to be taxed.

** NEVER EVER hold properties Long-term in a C Corp or S corp.. period.

** A one-member LLC is taxed on the members tax return. There is no separate return to be filed just for the LLC. If a C Corp owned the LLC, the taxation would be on the 1120 for the C Corp.

Be careful in structuring a member LLC with a S corp or C Corp owning the LLC for long-term holds, not a wise choice!

You can have 2 LLC's. The 1st could be treated as a passive entity (partnership) and the 2nd could be treated to be taxed as a Corporation. The 1st would be for your long-term deals and the 2nd for your flips, rehabs and mgt company.

You only need one corp for a mgt company and for flips/rehabs. There's no need for both, a C and S corp.

Let the questions begin :)


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#11 User is offline   daughtry 

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Posted 12 March 2002 - 03:51 PM

AAAAAARRRGGGGGGG! :flame:

I thought I finally had it!

Oh well, Back to the archives :)
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#12 User is offline   phillips 

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Posted 12 March 2002 - 04:19 PM

OOOpss
Looks like someone opened up a new window of questions.
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#13 User is offline   freeman 

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Posted 12 March 2002 - 07:33 PM

Ok DM, see if I have this right:

*  An S corp for the managing entity, but not for long-term holds.

*  How do you define "long-term?"

* Then two separate LLC's; one for flips & rehabs, which is managed by the S corp; the other for long-term holds, but is a separate entity, not managed by a corp. of any type.

Am I ok so far?? Also, where is the best place to go to get all the details of using these entities to structure you business?

Thanks,

Freeman
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#14 User is offline   david 

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  Posted 12 March 2002 - 11:20 PM

Ok, here is a question.

I have taken one property subject to, and put in a Land Trust.

I have filed my new Corp just last month, and still have to find a CPA, and decide whether or not to do the "S" thing or not.

How exactly do you put the property under the Corp, when it is already in a Land Trust?

(Right now I don't know how long the property will be held.  I have a real good offer to buy it out, and also a good offer to do a CFD for 30 years.)

I was thinking of starting an LLC next . . .but I need some of this clarified.

Thanks

David
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#15 User is offline   Dealmaker 

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Posted 13 March 2002 - 08:38 AM

freeman, on Mar. 12 2002,7:33, said:

Ok DM, see if I have this right:

*  An S corp for the managing entity, but not for long-term holds.

*  How do you define "long-term?"

* Then two separate LLC's; one for flips & rehabs, which is managed by the S corp; the other for long-term holds, but is a separate entity, not managed by a corp. of any type.

Am I ok so far?? Also, where is the best place to go to get all the details of using these entities to structure you business?

Thanks,

Freeman

Not quite...

* I said you can use 2 LLCs or 1 LLC and 1 Corp (C or S). The Corp or LLC (taxed as a Corp) can be used as the Mgt company and it can hold the Rehabs/flips short-term.

* Long-term 13+ months

* With asset protection and entity structuring there are no definite answers. The best information can be found here. If you want a personal consultation just let me know.

DM

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#16 User is offline   Dealmaker 

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Posted 13 March 2002 - 08:41 AM

david, on Mar. 12 2002,11:20, said:

Ok, here is a question.

I have taken one property subject to, and put in a Land Trust.

I have filed my new Corp just last month, and still have to find a CPA, and decide whether or not to do the "S" thing or not.

How exactly do you put the property under the Corp, when it is already in a Land Trust?

(Right now I don't know how long the property will be held.  I have a real good offer to buy it out, and also a good offer to do a CFD for 30 years.)

I was thinking of starting an LLC next . . .but I need some of this clarified.

Thanks

David

Selling it out-right and CFD is the same as a flip. It should be taxed within a Corporation.

The LLC should only hold your long-term deals.

When did you incorporate? Depending on when you inc, you can transfer the beneficial interest in the trust to the corp or redo the trust docs to reflect the corp ownership.

DM  :dance:
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#17 User is offline   jom 

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Posted 05 November 2002 - 10:39 AM

Pete couldn't have meant that. An "S-Corp" cannot be labeled a personal holding company. In fact, many people choose the S election to avoid being a PHC. He must have meant something else...what? I have no idea....

jom
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#18 User is offline   Julie 

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Posted 10 November 2002 - 09:56 AM

One question: Why set up an LLC and elect for it to be taxed as an S-Corp? Why not set up a Corp and make an S-election? What's the difference?

Also, I've run my remodeling company for a few years now as an S-Corp and I hate it. The reasons are:
1) It is a complex entity. You are an officer of a corporation and need to treat yourself separately.
2) As an officer, you must be paid a salary. The company must pay your salary like that of someone else doing the same job in the same field. So, even if your company is losing money (or you put in your own money), you must still be paid.
3) You pay yourself dividends (S-distributions, or distributions of profit) only if your company makes money. That is after you deduct company overhead (including your salary!).
4) You have monthly, quarterly and annual payroll reports to fill out and monthly deposits to make. If you don't make them timely, you are subject to penalties!
Basically, it was a lot of paperwork for one employee (me)
and in the beginning, when I wasn't making much (or any), I was still subject to taxes. Crazy really!
I can see that if you were really making a hefty income, then it is worth it to save a portion of the self employment tax. But, in the beginning, I don't think so for the reasons listed above. Once the money starts to roll in, then change.
This is just my experience and opinion, of course.
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#19 User is offline   Dealmaker 

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Posted 11 November 2002 - 09:52 AM

edavis95361, on Nov 5 2002, 02:22 AM, said:

Maybe Pete is talking about the corp being classifed as a PERSONAL HOLDING COMPANY.

Is that it?  Probably be best to ask an attorney/CPA

Nope.. To be labled as a PHC, the passive income must be 60%+ of the total income of a C corp.

DM :dance1:
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#20 User is offline   Dealmaker 

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Posted 11 November 2002 - 10:06 AM

Quote

Why set up an LLC and elect for it to be taxed as an S-Corp?  Why not set up a Corp and make an S-election?  What's the difference?


The annual fees/franchise taxes are cheaper in some states for an LLC. Plus an LLC does not have the formalities of a corporation.

Quote

1) It is a complex entity.  You are an officer of a corporation and need to treat yourself separately.


Actually, it's not complex and of course, the owner should be treated differently. You cannot expect to gain the benefits of a corporation and not have some guidelines to follow. It worth it.

Quote

As an officer, you must be paid a salary.  The company must pay your salary like that of someone else doing the same job in the same field.
But the distributions to the owner is FICA (social security and medicare) FREE. You're saving 15.3% on those distributions. Plus you get above the line tax deductions that are outstanding.

Quote

So, even if your company is losing money (or you put in your own money), you must still be paid.
Blatenly, not true. You do NOT have to be paid if there is NO PROFIT!! You're getting BAD tax advice.

Quote

You pay yourself dividends (S-distributions, or distributions of profit) only if your company makes money.  That is after you deduct company overhead (including your salary!).


Yes!! Of course, that's a huge benefit!! You're saving 15.3%..

Quote

You have monthly, quarterly and annual payroll reports to fill out and monthly deposits to make.  If you don't make them timely, you are subject to penalties! Basically, it was a lot of paperwork for one employee (me) and in the beginning, when I wasn't making much (or any), I was still subject to taxes.
Which QuickBooks can handle for you with very little effort.

Quote

I can see that if you were really making a hefty income, then it is worth it to save a portion of the self employment tax.  But, in the beginning, I don't think so for the reasons listed above.  Once the money starts to roll in, then change.


You're right.. if you're not making money and you don't have capital in the entity, you don't need an entity.

I'd encourage you to educate yourself on the positive benefits of the S Corp and the proper way to use it. Again, you do NOT have to a pay yourself if it's not making a profit.

DM :dance1:
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#21 User is offline   Julie 

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Posted 11 November 2002 - 05:00 PM

Well, I have recently consulted a tax attorney and a $150/hr CPA. This is what they tell me:
*A corporation must comply with what is The Wage Compensation law. This governs all corporations so that they are required to pay their officer what others in the same field, at that position, would be paid. Apparently, the IRS doesn't care whether the company is making money or not.
We are going to make the case that a wholly owned company, which the owner put a lot of personal money in, and the company lost money doesn't have to follow the same law. That the company has to pay the officer, but a greatly reduced salary. So far, we haven't gotten the IRS ruling.
But, if you have some IRS code reference that I could pass on to my advisors that would help out here....please, please send it on. Thank you!
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#22 Guest_DM_*

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Posted 11 November 2002 - 05:05 PM

Investor123, on Nov 11 2002, 08:00 PM, said:

Well, I have recently consulted a tax attorney and a $150/hr CPA.  This is what they tell me:
*A corporation must comply with what is The Wage Compensation law.  This governs all corporations so that they are required to pay their officer what others in the same field, at that position, would be paid. Apparently, the IRS doesn't care whether the company is making money or not.
We are going to make the case that a wholly owned company, which the owner put a lot of personal money in, and the company lost money doesn't have to follow the same law.  That the company has to pay the officer, but a greatly reduced salary.  So far, we haven't gotten the IRS ruling.
But, if you have some IRS code reference that I could pass on to my advisors that would help out here....please, please send it on.  Thank you!

This is not true!!!!!

You are getting WRONG INFORMATION.

YOU ARE NOT REQUIRED TO PAY A SALARY WHEN THERE IS NO MONEY TO PAY THE SALARY.

You CPA @ $150 is cheap one and he/she doesn't understand the Code.

Find another one.

DM :dance1:
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#23 Guest_DM_*

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  Posted 12 November 2002 - 08:49 AM

jp moses, on Nov 12 2002, 11:37 AM, said:

Maybe we could get Dyches to elaborate for us on this one as well?

This is really common sense.

How can the IRS force an entity to pay a salary when there's no money to pay the salary? It cannot.

It's sad when ignorance of a professional ruins a business for the small businessman.

There is no issue here.. 123 simply needs to find an accountant or CPA that actually understands the tax code.

Notice that he uses the word "Apparently".. well it not apparent.. it's an assumption and a wrong one at that. You are NOT required to pay a salary when there is not income to pay the salary.

If anyone would like to debate this further, please provide the tax code section in their post where it states the above.
-----------------------------------------------------------------------------------

What the IRS is regulating is the compensation paid from the S corp so that the majority income is not as a "Distribution of profit to the Shareholders". Why? Again, because the S Corp distributions are FICA (social security and medicare) Tax FREE. It's saves you 15.3%.

Some S Corps simply pay a very small salary or none and take the distributions only. The result is that the IRS (Fed gov't) doesn't collect any FICA on that distribution. The IRS is now looking closer at S corps and the salaries. If a salary is paid, it should be in line to the other positions in the industry for the same amount of service.

Even some of us that speak on this topic, do suggest that you do not have to take a salary the first few years of start-up if the income is not there to support it. You need to obtain counsel of a qualified CPA to determine your position.

DM :rolleyes:
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#24 User is offline   Mark FL 

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Posted 12 November 2002 - 12:21 PM

One benefit of a C Corp is to expense out as much as you can, and if there is something left over look into paying a salary. Ever look at the Bene Packet for an officer in a Fortune 500 company?
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#25 User is offline   Dyches Boddiford 

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Posted 12 November 2002 - 12:44 PM

Wow! Lots of issues here. Thanks Matt for letting me know this discussion was going on. Rather than quoting many of the prior questions in this thread, let me speak to a couple and I will be glad to address any other old issues that readers want to bring up in the next couple of days.

Salary. Salary from a corp can be a two-edged sword. If you do dealer property (quick-turn) in your own name, the net profits are ALL subject to self-employment taxes (FICA & Medicare). But doing the same deal through a corp only exposes the amount paid as salary to employment tax. For a S corp, the net after all expenses, including salary, is considered a distribution to the shareholders--whether or not an actual cash distribution is made or not--and is taxed only on the shareholders' personal 1040 returns.

How much Salary? If you did three houses that were major rehabs, you probably deserve a larger salary than if you need just one fluff job. This is true even if the same net profit was realized in each scenario. When we compare our work for the corp, we need to take into consideration the amount of hours required to generate the profits. Not that you should keep a time sheet, just estimate what it took. If you are not putting any time into the corp other than keeping up the minimal formalities required, you should be paid little, if any, salary. If, on the other hand, you are generating significant net profit and are not taking a salary, just passing all the income through, you are just asking for an IRS audit. This is the only salary question I have consistantly seen with a S corp being audited.

So, what if you a putting in quite a few hours with a brand new corp, but the corp is loosing money? This is a common situation with a new corp--it can take time to be profitable in a new venture. For a brand new corp, simply have a board meeting and offer to forego any salary until the corp has built up some assets with the anticipation of increased compensation in the future. This should be good for 2 or 3 years.

So, what if you a putting in quite a few hours with an established corp, but the corp is losing money? Something is wrong here. This is serious--you need to reaccess what you are doing and why you are losing money. But even then a board meeting can be had where you offer to forego any salary until the corp is once again profitable with the anticipation of increased compensation at that time. Lee Iacocca took $1 salary for the first few years when he joined Chrysler while he was turning it around.

Entities to use. Rule-of-thumb: Corp for business (active business, dealer/quick-turn property, development, building) and LLC (or LLP or LLLP, depending on state law) for investment property (rentals).

What's the difference? Dealer property is where you purchased the property with the intent to immediately resale for a profit. Doesn't matter if you do fix-up or not and it doesn't matter how long you hold it. One tax court case from last year said a developer who bought a tract of land with the intent to subdivide and resale. But he but did not, rather he sold it after 10 years as a single tract, just as he had purchased it. The tax court said was still a dealer property subject to ordinary tax, not capital gains.

An investment property is one that you purchase with the intent to hold for long-term appreciation and income. Rental property is a good example. You will get capital gains treatment on investment, but not on dealer property.

Both the corp and the LLC provide good liability shields. They are just treated differently when it comes to taxes.

It is easy to setup either entity yourself. The key is doing the internal paperwork and running the entities properly. That is why I have a two day class on each. Registering them with the state (all the attorneys do) only takes about 30 minutes of class time. If the internal paperwork is not done properly for either entity, the liability shield can be easily penetrated in court.
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#26 User is offline   jom 

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Posted 14 November 2002 - 01:02 PM

Question here: I've understood the benefits of these: Using LLC for holds and Corps for flips. I understand, for the most part, the issue of holding long-term props in LLC's but why is it that you can't (or shouldn't?) do Flips from within an LLC (rather than a Corp)? Is it a tax issue? If so, what?

Thanks

jom
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#27 User is offline   Dyches Boddiford 

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Posted 14 November 2002 - 03:35 PM

Quote

Posted on Nov 14 2002, 03:02 PM
--------------------------------------------------------------------------------
Question here: I've understood the benefits of these: Using LLC for holds and Corps for flips. I understand, for the most part, the issue of holding long-term props in LLC's but why is it that you can't (or shouldn't?) do Flips from within an LLC (rather than a Corp)? Is it a tax issue? If so, what?


You guessed it. For the most part, the liability shields for the corporation and LLC are the same, but the taxation is significantly different. Two main issues point to the corporation for dealer (flip) property.

First, unless you have chosen for your LLC to be taxed as a corporation, ALL net income flows through to the owner's tax returns in the same character as earned. So, passive income flows through as passive income, active (business) income flows through as active income. Since any active income falling on an individual's return goes on schedule C, it is not only subject to ordinary income tax, but self-employment taxes as well--approx. 15% over and above regular income tax. Net active income earned by the corporation on the other hand can be converted at the corporate level to salary (subject to employment taxes) and dividends. In the case of the S corporation, the dividends are not taxed at the corporate level and just pass through to the owner's personal return not subject to empoyment taxes.

Second, investment properties have depreciation which is a paper loss. Losses are not passed out of a C corporation but retained until they can be used up against other income. For an S corporation, losses can only be passed through to the extent of the owner's basis in the S corporation. The owner's basis is comprised of just two items: owner's capital contributions (what the owner has paid for the stock) and any DIRECT loans the owner has made to the S corporation. Just guaranteeing a loan made directly to the S corporation does not count. So, there may be years when a S corporation owner does not personally get the benefit of the depreciation deductions for investment property held by the S corporation. This is easily solved by the shareholder making additional loans to the S corporation to increase their basis...But how many real estate entreprenuers know their tax standing before the end of the tax year?! So this is not a practical solution. Much better to use a flow through entity such as an LLC where the owner's basis not only includes these items, but also includes any loans made by others to the LLC or on any property owned by the LLC. Very rarely would the owner of an LLC run into these limitations.
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#28 User is offline   jom 

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Posted 15 November 2002 - 01:35 AM

Quote

Since any active income falling on an individual's return goes on schedule C,


This one I did NOT know. So basically, active income (ie Flips) from an LLC is tax-treated like a Sole Proprietor. Given that, it makes sense now.....

Thanks!

jom
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#29 User is offline   Julie 

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Posted 16 November 2002 - 12:40 AM

I've been self employed for 12 yrs. The thing that makes be crazy is how you have to bumble along, getting bad advice on top of bad advice. That bumbling sure can cost you big.
On the other hand, I am extremely appreciative of people who really know what it is they are talking about. And, who can take complex issues and clearly lay them out for you. That is a truly valuable skill and service.
THANK YOU VERY MUCH!
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#30 User is offline   letusbuyyourhome 

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Posted 15 February 2005 - 03:30 AM

Is it necessary to form the corp or the llc in the state in which you are doing business? I've heard of many people forming the corp or LLC in Delaware, I believe this is for tax purposes, and because Delaware doesn't require that the business actually be run from Delaware (is this correct?) Also, if you do so, are there any difficulties in doing business in the state in which you reside (in my case, Florida)?

I'm coming across so many deals, yet I haven't gone into contract on the first one because I don't know how to get started, as in do I first set up an S-corp, LLC, or what?????

Thanks, I feel stupid at the moment
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#31 User is offline   sandideh 

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Posted 23 February 2005 - 11:25 PM

Dyches Boddiford, on Nov 12 2002, 11:44 AM, said:

Wow!  Lots of issues here.  Thanks Matt for letting me know this discussion was going on.  Rather than quoting many of the prior questions in this thread, let me speak to a couple and I will be glad to address any other old issues that readers want to bring up in the next couple of days.

Salary. Salary from a corp can be a two-edged sword.  If you do dealer property (quick-turn) in your own name, the net profits are ALL subject to self-employment taxes (FICA & Medicare).  But doing the same deal through a corp only exposes the amount paid as salary to employment tax.  For a S corp, the net after all expenses, including salary, is considered a distribution to the shareholders--whether or not an actual cash distribution is made or not--and is taxed only on the shareholders' personal 1040 returns.

How much Salary? If you did three houses that were major rehabs, you probably deserve a larger salary than if you need just one fluff job.  This is true even if the same net profit was realized in each scenario.  When we compare our work for the corp, we need to take into consideration the amount of hours required to generate the profits.  Not that you should keep a time sheet, just estimate what it took. If you are not putting any time into the corp other than keeping up the minimal formalities required, you should be paid little, if any, salary.  If, on the other hand, you are generating significant net profit and are not taking a salary, just passing all the income through, you are just asking for an IRS audit. This is the only salary question I have consistantly seen with a S corp being audited. 

So, what if you a putting in quite a few hours with a brand new corp, but the corp is loosing money? This is a common situation with a new corp--it can take time to be profitable in a new venture. For a brand new corp, simply have a board meeting and offer to forego any salary until the corp has built up some assets with the anticipation of increased compensation in the future.  This should be good for 2 or 3 years. 

So, what if you a putting in quite a few hours with an established corp, but the corp is losing money? Something is wrong here.  This is serious--you need to reaccess what you are doing and why you are losing money. But even then a board meeting can be had where you offer to forego any salary until the corp is once again profitable with the anticipation of increased compensation at that time. Lee Iacocca took $1 salary for the first few years when he joined Chrysler while he was turning it around.

Entities to use. Rule-of-thumb: Corp for business (active business, dealer/quick-turn property, development, building) and LLC (or LLP or LLLP, depending on state law) for investment property (rentals). 

What's the difference? Dealer property is where you purchased the property with the intent to immediately resale for a profit.  Doesn't matter if you do fix-up or not and it doesn't matter how long you hold it. One tax court case from last year said a developer who bought a tract of land with the intent to subdivide and resale.  But he but did not, rather he sold it after 10 years as a single tract, just as he had purchased it. The tax court said was still a dealer property subject to ordinary tax, not capital gains.

An investment property is one that you purchase with the intent to hold for long-term appreciation and income. Rental property is a good example.  You will get capital gains treatment on investment, but not on dealer property.

Both the corp and the LLC provide good liability shields.  They are just treated differently when it comes to taxes. 

It is easy to setup either entity yourself.  The key is doing the internal paperwork and running the entities properly.  That is why I have a two day class on each.  Registering them with the state (all the attorneys do) only takes about 30 minutes of class time.  If the internal paperwork is not done properly for either entity, the liability shield can be easily penetrated in court.
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[B][FONT=Impact][COLOR=blue]So, is it safe to say since I am going to begin REI on subject to properties and find tenant buyers, that I should register an LLC. Is there any other box that I should check on the document other than LLC?

I am learning here...thanks for your patience.
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#32 User is offline   Red Raider 

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Posted 26 April 2006 - 12:03 AM

View Postletusbuyyourhome, on Feb 15 2005, 04:30 AM, said:

Is it necessary to form the corp or the llc in the state in which you are doing business? I've heard of many people forming the corp or LLC in Delaware, I believe this is for tax purposes, and because Delaware doesn't require that the business actually be run from Delaware (is this correct?) Also, if you do so, are there any difficulties in doing business in the state in which you reside (in my case, Florida)?


I'm guessing that no one has answered your question yet. There was an advantage about 10 to 15 years ago to incorporate in Delaware. Since then, many states have gotten more relaxed on their corporation laws, so incorporating in Delaware doesn't offer much of an advantage anymore. It really depends on where you live, though.

I live in Texas, so for me it was cheaper to incorporate in Texas than in Delaware. Texas requires a $750 fee from a non-resident corporation to do business in Texas. So, if I incorporated in Delaware, I would have had to pay whatever Delaware's fees were plus the $750 to Texas. The fee to incorporate in Texas is $300.
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#33 User is offline   Leonard 

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Posted 25 May 2006 - 08:11 PM

View PostDyches Boddiford, on Nov 12 2002, 02:44 PM, said:

What's the difference? Dealer property is where you purchased the property with the intent to immediately resale for a profit. Doesn't matter if you do fix-up or not and it doesn't matter how long you hold it. One tax court case from last year said a developer who bought a tract of land with the intent to subdivide and resale. But he but did not, rather he sold it after 10 years as a single tract, just as he had purchased it. The tax court said was still a dealer property subject to ordinary tax, not capital gains.


So you only pay capital gains on property that you intend to rent out? Did I understand you correctly?
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