question for my buisiness

7 Replies

Hi guys, I have a question, I'm just starting should i start a corporation or an LLC for my investing

Neither.  Forming entities is a secondary task for someone starting out.  Learning values and making offers is your first order of the day.

To actually answer your question...

If you're fix and flipping creating an s-corp might help with taxes.  Income from fix and flipping is ordinary income and is subject to self employment tax.  If you're making quite a bit of money from this you may be able to do it inside a s-corp and distribute part of the profits as distributions from the s-corp.  You would still have to pay yourself a "reasonable salary" and that would still be subject to SET.  The part distributed as distributions is not.  Same for a lot of other RE jobs like wholesaling, property management, developing, etc.

If you're holding rentals then owning them by an LLC might give you some asset protection. No effect on taxes at all, unless you elect special tax treatment. Holding in an LLC makes financing more difficult. If you want 30 year fixed loans the ONLY way to get those is to buy and mortgage in your own name.

Thanks Jon , I figured when I make offers if the seller got a letter from a company , they would take it more serious

I agree with @Jon Holdman  Most newbies spend too much time on the details that don't really matter.

I suggest learning the business and deciding what type of investing you'd like to get into first, then get your feet wet by buying your first few properties in your name and as you grow you can start looking into entity structures.

If you're thinking about asset protection, a good insurance policy will give you the same protection as an LLC. If you're thinking about taxes, talk to a local tax advisor after you develop your investing model to find the best strategy.

Cameron Norfleet, Real Estate Agent

IDK about MA, but creating an LLC here in CO takes about 5 minutes and costs $50 on the Secretary of State's web site. So, if you want that its easily do-able.

As far as "taking offers seriously" maybe a company works better, maybe as an individual works better.  The way to evaluate that is split testing.  Take a list and send half one letter and half a different one then track your results.

Originally posted by @Jon Holdman:

IDK about MA, but creating an LLC here in CO takes about 5 minutes and costs $50 on the Secretary of State's web site. So, if you want that its easily do-able.

As far as "taking offers seriously" maybe a company works better, maybe as an individual works better.  The way to evaluate that is split testing.  Take a list and send half one letter and half a different one then track your results.

FYI in MA it is $500 and $500/year after, then of course the other costs and obligations of having a company (Even if bare bones and poorly run:) ).  While it has its place not a great option if you don't have a big budget to start out and that $500 isn't something you will feel. 

Shaun Reilly, Real Estate Agent in MA (#9517670)
1-800-774-0737

I think @Ali Boone  wrote a piece on this subject for the BP blog awhile back. It seemed to echo the advice @Jon Holdman  gave you. Best of luck! 

thanks everyone , first I'll see about getting some deals then I'll worry about starting a cooperation or an LLC

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