'Flipping' 25+ per year. Best entity structure?

6 Replies

Current business snapshot:

-Currently buy/renovate/sell 25+ SFR per year.

-Avg hold time from purchase to sale is 3 months (no property ever held longer than 4 months)

-Hold approx 6 properties at any given time per 3 months.

-All properties are 'Free & Clear'

-Only one owner involved (no partners or outside funds)

-Considering entity solution of Multiple LLCs under S Corp Holding company.

Would greatly appreciate feedback on ideas for a business entity structure. An attorney and I discussed a structure of an S Corp that holds liquid funds and then two 'disregarded' LLC entities that actually hold the properties. 'Disregarded' meaning that the two LLCs will not have tax IDs and the profits will roll up to the S Corp for taxation on the aggregated profits. The purpose of two LLCs is to reduce the risk of total loss from any potential lawsuit by spreading housing assets among more than one LLC. The purpose of the S Corp holding company is to be a centralized entity for the business capital (LLC can transfer cash here when not in use thereby reducing LLC value as lawsuit target) and S Corp assists in reduction of S/E tax. The entities would also be covered by business umbrella policies and all properties would have individual property insurance.

I am trying to determine if this suggested structure is too complex/overkill or if it is the most suitable. Would it be more practical to have just one LLC electing to be taxed as an S Corp? Or some other structure?

Thank you for your feedback

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@William Behm You might want to consider a Series LLC. Check out the link below from Attorney/Best Selling Author/Host of legalwiz.com Bill Bronchick. It will explain everything, and perhaps that will be the solution you are looking for. I myself am planning on setting one up sometime this year. Good luck.

What is a Series LLC?

I had my attorney set up a series LLC in TN. It will be interesting to see how courts will treat the separation of the series entities after an incident. There is still some debate because of how new they are and how people will test them in court. I hope that I never have to find out. I like the structure of the parent LLC controlling the others.

I would consider reusing the same lower entities just to save on the cost of starting and maintaining entities. I don't see an issue with holding 3 properties in each entity, but that is dependent on your price point and comfort level.

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