LLC or Incorporate?

4 Replies

I am a aspiring RE investor that just received my RE license. Between operating as a practicing agent and buying investment properties I know I need to form an LLC or incorporate. I have received advice for both strategies. What have you done and what should I do?

Brand new to BP

Not sure you need to do either one @Tim McConnaughey . I would hold multi-family buy and hold commercial property only in an LLC. I don't mix houses and entities. Too many barriers to financing and insuring them. I also don't hold assets in corporations, C or sub-S. My mgt co is an s-corp, though, and that works great.

It would probably be easier for others to chime in if your goals were more clearly stated.  Are you going to wholesale, fix/flip, buy and hold?  This topic has been covered pretty thoroughly.  Sometimes the best action regarding this is just own in your name and have good insurance!

LLC it a much better way to go. The taxes imposed on a corp can be daunting. But check with your accoountant, some like LLCs others line Corps.

Most states do not license LLC's so you will probably need to form a corporation for your brokerage.

Your investment firm can be whatever you prefer for tax and/or financial reasons.

I am not a CPA and offer no tax planning advice but in general a C corp would need to pay you a salary or commission (which is taxed as income) and then the corp pays its own tax on profits, if any are left after payroll.  Corporate tax is relatively low if you're not doing over $10M/year.

The LLC, LP, and S corp are pass through entities so any profits that are made would be distributed through to the Members, Partners, or Share Holders (respectively) and taxed at each individual's income tax bracket.

Another thing you may want to keep in mind is that a lot of foreign governments do not recognize an LLC (yet) and therefore can cause unnecessary challenges if you are seeking foreign capital.

Thank you for the input. It is pretty much split it seems. I'm really going to need to break down the tax advantages of both. I'm leaning towards LLC as it seems to make the most sense. Here in Kansas either one is pretty simple to create. Thanks again.

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