I have been reading about many topics on setting up S corp for flipping homes. Was wondering what other investors in California have set up for their business. Are you buying homes under your business entity? Newbie trying to get details. Thanks in advance
Mark in Orange County
The advice I have been given is: it depends on what you need to protect. If you have a net worth that needs protection, then do it. If you are starting out with limited net worth you might not need to do it. It is a personnal decision that I would consult a Accountant to see if it is worth it.
My acct had my wife set up an LLC and then file taxes as an S-Corp. He said that is how is accounting firm is set up too. Didn't get into the why behind it all because he's busy with income tax time but I plan to have a chat with him after tax season. My old home building company was a C-Corp and my real estate holding company is an LLC. After I get the scoop on the why behind electing to file taxes as an S-Corp I will probably be filing the paperwork. I guess that route provides the best of both worlds.
Hey @Mark Ho ,
(this is just off books I have read and also meeting with an attorney).
I agree with @Tim Crumley . I read a really great book that talked about the advantages of forming the LLC and filing as an S-Corp. The protection is great as an LLC, but if you are flipping houses with the LLC the IRS looks at it as a business and you get taxed at the state and fed income rates (brackets you fall within), a payroll tax at 15.3%, if the company is making over $113,700 a year it get's taxed an additional 2.3% medi-cal, and any employee making over $200,000 gets taxed at .9% for medi-cal.
If you want to form it as an S-Corp, that's great too. LLC and S-Corps basically have the same protections with some different items that cover employees. I have recently started a property management company by myself and formed an S-Corp through LegalZoom. I am currently forming another business entity with two other business partner that will be ran through an LLC.
Let me know if you have any other questions and I try my best to answer them, or guide you in the right way.
Thanks for the response everyone.
@Peter Mckernan What is the name of the book?
loopholes of real estate
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