Flipping houses in an LLC owned by my S Corp?

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Flipping houses in an LLC owned by my S Corp?

Hunter Harms
Rental Property Investor · Scottsdale, AZ · Member since 2017 · 37 posts · 13 votes

I recently heard of an entity structure being used by another flipper that piqued my interest and I need some BP feedback! The way he put it is that his main company is an S Corp and he creates an LLC for each active flip that is owned by his S Corp. After the project has been completed and sold he dissolves the LLC for that property and repeats the process. What are the advantages of doing this both in taxes and liability? Disadvantages?

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Grant Rothenburger
Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
8y

@Hunter Harms I would think a disadvantage would be costs to set up the new LLC's for every flip. I heard an attorney on a podcast talk about something along these lines, saying that until you crossed a certain dollar amount of property value in an LLC, it doesn't make sense to have every property in a separate LLC. I forget exactly what the dollar amount was, I'll try to find it.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y
    Taxes-none. Liability-with some liability on an individual property, the liability is limited to that llc.
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  • Grant Rothenburger
    Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
    8y

    @Hunter Harms I would think a disadvantage would be costs to set up the new LLC's for every flip. I heard an attorney on a podcast talk about something along these lines, saying that until you crossed a certain dollar amount of property value in an LLC, it doesn't make sense to have every property in a separate LLC. I forget exactly what the dollar amount was, I'll try to find it.

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  • Logan AllecBusiness Member
    Accountant · Los Angeles, CA · Member since 2014 · 1k+ posts · 980 votes
    8y
    Depends on your state. Probably wouldn't be cost-effective in California, where you're paying at least $800 for every year an LLC is in existence.
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