Getting an LLC as an agent

Columbus, Ohio
Starting Out
3yFollow

Getting an LLC as an agent

Matthew William
Member since 2023 · 19 posts · 33 votes

I am fairly new to the real estate space, and am considering becoming an agent. My understanding is as an agent with a company (Century 21 for example), I am still considered 1099. Would it be wise at get a LLC? If it's possible, how exactly would that work while being with a company?

3Reply
266 views

Most Popular Reply

Jeff Nash
Accountant · McKinney, TX · Member since 2023 · 394 posts · 580 votes
3y

This topic is relevant as I just had conversation with a CPA and his client yesterday with respect to setting up an LLC and making an S-election to save on self-employment taxes. This client was located in NJ and told by a consulting firm that he should employ this strategy. The issue is that NJ among other states require a natural person rather than an entity to be paid, unless the agent is a broker in which case there are also some stipulations and some additional costs of doing business. In any case it's an issue of assignment of income which is prohibited. I'm deviating a little from the original post but saw some the other commentary which is great and wanted to expand on it a bit.

4Reply
See this reply in the discussion

12 Replies

Jump to latestLatest
  • Reed Rickenbach
    Real Estate Broker · Memphis, TN · Member since 2020 · 202 posts · 203 votes
    3y

    This is just my understanding from being an agent in TN. I accept my commissions in my personal name as far as taxes are concerned. 

    Real estate commissions will be paid to your personal name (the name on your license). A single-member LLC will be treated as a passthrough entity. You could form an LLC and recognize the income (and respective expenses) through that entity... but it would yield the same result. Actually, you'll have expenses related to forming/filing/maintaining an LLC that you otherwise wouldn't have.

    0Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    3y
    Quote from @Matthew William:

    I am fairly new to the real estate space, and am considering becoming an agent. My understanding is as an agent with a company (Century 21 for example), I am still considered 1099. Would it be wise at get a LLC? If it's possible, how exactly would that work while being with a company?


     I do not really think that is necessary. If you have properties then yes but just being an agent then no I do not think you need to do that. 

    0Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Matthew William:

    I am fairly new to the real estate space, and am considering becoming an agent. My understanding is as an agent with a company (Century 21 for example), I am still considered 1099. Would it be wise at get a LLC? If it's possible, how exactly would that work while being with a company?


    There is no real benefit to getting an LLC. You are an independent contractor and can receive payments in your personal name. There are no tax benefits, you don't need to protect the income or your privacy.

    The DIY Landlord Book4.7247 Reviews
    WebsiteView Page
    0Reply
  • Marc Howard
    Investor · Baltimore, MD · Member since 2023 · 38 posts · 10 votes
    3y

    Yep, as an agent you're usually a 1099 contractor. Getting an LLC can be smart for tax and liability reasons. So basically, you'd create the LLC and sign your agent agreement with the brokerage under the LLC's name. Just make sure your brokerage is cool with that setup.

    Check out this link for more info: www.nolo.com/legal-encyclopedia/form-llc-for-real-estate-agents.html

    Are you planning to invest in real estate or just focus on being an agent? 

    0Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    3y
    Quote from @Matthew William:

    I am fairly new to the real estate space, and am considering becoming an agent. My understanding is as an agent with a company (Century 21 for example), I am still considered 1099. Would it be wise at get a LLC? If it's possible, how exactly would that work while being with a company?


    You can get started in your personal name, but if you reach a 6 figure income talk to your CPA about an LLC set up as an S corp and pay yourself a salary and take the rest as a draw. That will save you from paying 15.3% self employment tax on that portion. Basically when you start making twice of what you are paying yourself as a reasonable salary it really makes sense to save 15.3% on the rest.

    2Reply
  • Jeff Nash
    Accountant · McKinney, TX · Member since 2023 · 394 posts · 580 votes
    3y

    This topic is relevant as I just had conversation with a CPA and his client yesterday with respect to setting up an LLC and making an S-election to save on self-employment taxes. This client was located in NJ and told by a consulting firm that he should employ this strategy. The issue is that NJ among other states require a natural person rather than an entity to be paid, unless the agent is a broker in which case there are also some stipulations and some additional costs of doing business. In any case it's an issue of assignment of income which is prohibited. I'm deviating a little from the original post but saw some the other commentary which is great and wanted to expand on it a bit.

    4Reply
  • Jimmy LieuBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
    3y
    Quote from @Matthew William:

    I am fairly new to the real estate space, and am considering becoming an agent. My understanding is as an agent with a company (Century 21 for example), I am still considered 1099. Would it be wise at get a LLC? If it's possible, how exactly would that work while being with a company?

    Hi Matt, I am a licensed real estate agent and investor here in Columbus Ohio - so you don't NEED to open an LLC but I personally opened up an LLC just so I can separate and organize my real estate agent expenses much better and effectively.

    I have an LLC for my real estate investment properties and an LLC for my real estate agent business. I do it more so for organization and not to commingle my personal with my real estate agent business.
    [email protected]614-300-7535
    Jimmy Lieu, Red 1 Realty4.9120 Reviews
    WebsiteView Page
    1Reply
  • Joshua JanusBusiness Member
    Realtor · Cleveland, OH · Member since 2021 · 1k+ posts · 1k+ votes
    3y
    Quote from @Matthew William:

    I am fairly new to the real estate space, and am considering becoming an agent. My understanding is as an agent with a company (Century 21 for example), I am still considered 1099. Would it be wise at get a LLC? If it's possible, how exactly would that work while being with a company?


     I would suggest you talk to a real estate attorney for a question like this. Let me know if you need any good references. 

    [email protected]614-502-5316Podcast Guest on Show From DoorDasher to $1.5 MILLION in Real Estate (All at 22 Years Old!)
    1Reply
  • Jason Marino
    Attorney · Member since 2022 · 160 posts · 186 votes
    3y

    Hi Matthew,

    I agree with the post above that notes that an LLC that elects to be treated S Corporation for tax purposes could be used in this situation. This would offer a tax advantage of avoiding the self employment tax at a certain income level, and the entity would provide you with limited liability protection if a client that you interacted with decided to initiate a lawsuit. In the case that the lawsuit was not covered by insurance, this entity would protect your personal assets from being involved in the lawsuit to pay a judgment.

    0Reply
  • Ryan GarrisonPro Member
    Rental Property Investor · Olympia, WA · Member since 2017 · 236 posts · 83 votes
    3y

    When you start making good money, think about S corp, paying yourself as W2 with taxes, social security, etc. 

    I am not a tax professional, financial advisor or attorney. Talk to those guys for licensed advice :)

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free