LLC's, Taxes and My Pay Check!!

2 Replies

Hello Everyone!

I have a few questions in regards to LLC's. Here's a quick background

I have one property right now (the one i live in) but will soon be moving out of state and renting it out.  I'm looking at going into the lower income market here and trying my hand at section 8 to start cash flow going.  So far my strategy is this (opinions welcome!):

-Purchase distressed properties at deep discounts. Currently I'm looking at SFH's around the 15-20K price range. Avg payout from S8 is ~550-600 for 3bd 1bth home. I can fix these homes up typically for under 5K. I have the ability to pay this all out of pocket but am considering financing options (would love to hear advice on this if you have any).

-The Goal is to buy 1 or 2 homes this way prior to moving in march. 

-My mentor, who has a majority of S8 properties, suggests starting an LLC right off the bat for protection purposes. I am not super smart in this area but understand the basics of LLC's... here are my questions.

1. If I go the LLC route, is it more beneficial to register the company in a state like Nevada then just do a foreign filing the different states I end up moving to?

2. Tax-wise, would it be beneficial to elect for LLC to be taxed a corp shielding me from the income tax bracket increase (is that how it works?). Right now, the income from the one property would bump me into the next tax bracket.

3. I've always been curious as to the most efficient way to pay yourself. If I am the single employee for the LLC, how does my pay check work? I've read that you can "loan" yourself money from your LLC up to 13K per year without incuring a tax on the money. So if that is the case, lets say I have LLC "A" and each year it gives me a 13K loan... can I just make LLC "B" and have it "loan" out another 13K? Is this even the most effective way to do this? If the LLC was being taxed as a Corp would I then claim the 13K "unpaid loan" as a loss on my taxes?

4. What profesional should I seek out for answers to these questions? Lawyer or CPA?

5. Are there any resourses you can point me to in order to get the skinny on creating a LLC?

As always I appreciate you guys and your help!  Always a plethora of information.  Hope you have a great week!

-Drew 

Id go to a CPA for those type of questions.

Drew, 

I have found it is easier just to have the LLC in the state you are buying in.

If you register out side the state, the state you buy in will have you register and it will cost almost the same and then you also have more to remember. You should really meet with a real estate attorney for this. Each state can be a little different. 

When it comes to paying yourself thur a Llc, it is as simple as a draw. 

On your other tax questions @benjamintimmins is correct, see a CPA 

Also if you are moving out of state I would have you consider a professional management team to handle things for you and interview a few of them before leaving.

Good Luck

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