LLC vs. S Corp

8 Replies

Hello everyone, I am just starting out and looking for my 1st property to flip. At this point, do I need to worry about forming an LLC or S Corp? My goal is to focus on flipping houses for the next year and then keep a few as rental properties. With that said, would an LLC or a S Corp be better suited for what I'm trying to do? Thanks for any input!

I am not an accountant, but when I formed my business, both my attorney and accountant advised me that starting off with an LLC was the way to go for me. It allows you more flexibility and less stringent regulations on distributions, etc. Obviously talk to your accountant and attorney to get going and find out what works best for you, but I would say that an LLC is the way to begin.

Brandon Ingegneri, Contractor in RI (#41301)
401-301-5528

@Brandon Ingegneri, Thanks for the feedback!

You need both legal and accounting advice to make this decision. 

One option is an LLC taxed as an S corp. Depending on what you do in your business an LLC may be better, or an S corp may be better. Either can help with liability but not as much as you might think.

I wold set up an LLC, as @Ned Carey stated you can elect to be treated as an S-corp for tax purposes or it can be treated as disregarded identity for tax purposes allowing you to report on your individual return.  Just so you know treating it as an s-corp will cost you more in tax and accounting fees, but their can be a tax advantage if you do enough flips, and you have to make the election within 2 and 1/2 months of starting or the start of the tax year of the election.  You need to meet with a local licensed tax professional in your area before you set up so that it is done correctly. Find some one who owns investment real-estate themselves 

This is a question for your CPA. Good luck.

My company is an LLC but taxed as an S-Corp. With an LLC I have less paperwork to file than with an S-Corp but I still receive the tax benefits. My accountant was the one who explained it to me and helped me set it up. I would recommend you find a real estate friendly CPA

Originally posted by @Jonathan Williams :

Hello everyone, I am just starting out and looking for my 1st property to flip. At this point, do I need to worry about forming an LLC or S Corp? My goal is to focus on flipping houses for the next year and then keep a few as rental properties. With that said, would an LLC or a S Corp be better suited for what I'm trying to do? Thanks for any input!

Set up and LLC and when you expect to make $50k profit in any given year, elect S status. An S-Corp is too costly and complicated if you don't have the operating income to justify it. Generally, in year one, my clients utilize an LLC and we revisit for year two.

Thank you everyone for your feedback. That was helpful. I'll be speaking with my accountant as soon as possible. 

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