I am looking to do BRRRR and will use hard money lending at first. Given this, I am going to be creating an corporation in the state where I will be buying properties (Florida). I am confused if I should be going to S corp route. C corp doesnt look advantageous for me. I am leaning towards just an LLC but not sure if I should then be reporting as a S corp. Any and all advice welcome, thank you!
Will the lender you use for the refinance out of your hard money loan allow you to finance in an entity? That would be my first question unless you just plan to quit claim the home into an LLC after you have closed on the refinance.
You may want to check with your refinance lender to see if it affects the timeline. The last I heard, Fannie Mae can't refinance you for at least 24 months if you use an Inc. If you use an LLC, they can do the refinance immediately if you are direct to Fannie Mae. If the refinance lender isn't direct to Fannie Mae, they may say you need to hold it longer as well.
As @Curt Davis mentioned though, if you are using your personal name to purchase/refinance and then doing a quit claim into either LLC or Inc it really doesn't matter.
Make sure you talk to a CPA and Attorney regarding all of the tax and legal aspects, someone who knows the state you live and will be doing business in.
In general, there aren't too many instances where a C-Corp is advantageous as compared to an LLC, in your context. Both can be taxed as an S-Corp (flow through), but the LLC may be easier to manage. None of this is legal or tax advice, just some things to consider when speaking to a professional who understand specifics of the state. The questions on financing raised earlier are also important to take into consideration.
There aren't many situations where a C-Corp would make sense for flipping or holding homes.
If you are holding a property after you rehab, you likely do not want to do this in an S-Corp by itself. However, running your flipping and managing business through an S-Corp may have tax advantages.
Doing everything in an LLC at first (normal LLC, not LLC taxed as an S-Corp) will keep things simple when you start, but make sure you get advice from someone who knows your exact situation.
I would recommend having a conversation with your Real Estate savvy CPA BEFORE you do anything. A RE CPA can help you structure this business in a way that makes sure you pay the bare minimum in taxes as legally required.
Best of luck as you start the business and let me know if you have any other questions!
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Just for kicks, here is an article with some examples of how c and s corps can be used in RE (very situation specific)
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