1099 vs LLC
Hey everybody! I would just like to know which do you think has the better loan options? An LLC Contractor or a 1099? Its a very vague question by design. I'm looking to gather as much information on the advantages of a contractor being paid as a 1099 vs LLC and vice versa. What are some of the tax advantages as well? When do you think it is absolutely necessary to switch from a 1099 to an LLC? I really look forward to hearing your thoughts! Thank you!
Most Popular Reply
As a 1099 borrower, you’re qualifying based on personal income, usually two years of tax returns, and your write-offs can reduce what you qualify for.
Once you start buying investment properties, most are held in an LLC, and that opens the door to DSCR loans. Those are based on the property's cash flow, not your personal income, which makes it easier to scale. That's why a lot of investors transition into LLCs over time. It's not that it automatically gets you better terms, it just gives you more flexibility in how you qualify.
As for when to switch, it usually makes sense once you’re acquiring properties or your personal income is no longer the best way to qualify for financing.