Getting started - Inc vs LLC ?

Question

Scott Schaeffer · Answer

Thanks Douglas...we plan to "slow grow" into more rental properties while doing some rehab and sell...And I do plan to find a good CPA to help give some direction.

Attila Vad · Answer

Hello @Scott Schaeffer in BP.

I'm not a legal or tax advisor, however based on my experience, the savvy investors usually establish an LLC partnership with a 2% member that is also an LLC taxed as a C-corp. In this case you have the benefit of both world. You need to find a CPA to give you advice how to operate the partnership.

Douglas Skipworth · Answer

@Scott Schaeffer,

I am not an attorney nor do I give tax advice, but I have always been told that you do not want to own real estate in a C-Corporation.

Also, real estate investing can be classified as "passive income" while rehabbing and flipping can be viewed as "active."  I recommend that you ask your CPA about whether you want to keep all of those activities in one entity or perhaps separate it into at least two.  I do not know the best answer for you, but I know that if you share you goals and plans a good CPA or attorney should be help to lay out all the pros and cons for you.

Sounds like you're on the right track already!

Douglas Skipworth · Answer

Hello, @Scott Schaeffer.

What is your company going to do (eg, wholesale, flip, buy and hold, manage, etc.)?

Once you determine exactly what you are trying to accomplish, a good attorney or tax accountant can give you the pros and cons of every legal entity option.

Usually, it is pretty easy to decide the structure once you know the end game.

All the best,