Finally taking the plunge into the "Flip or Flop" world! Hopefully, no flops!
My partner and I are in the process of waiting for the paperwork to be processed for our Llc/S-corp that our CPA recommended we set up before we buy anything to rehab. My partner is also waiting for her HELOC money to become available in the next 2 weeks. In the meantime, we have found a great deal on a townhome to flip and I do have personal funds I could buy it with now. My question is: is it too risky to purchase that property without our Llc/S-corp in place? What tax problems will I have such as taxing the profit as personal income? BTW, we live in the Raleigh NC area.
Don't want to miss out on a great deal but I also don't want to have tax issues down the road. There is soooo much conflicting advice out there that we have had "paralysis by analysis". Thank you in advance for any and all advice!
@Suzanne HAINER Once your partner has his/her money, you can simply buy in your own names. Write up a little agreement that show how much you each contributed, how much you will each contribute to the rehab and what percentage of the property you each will own and have it notarized. When you sell you split the proceeds accordingly.
it will take a couple of weeks to close on it anyway you can make the contract to purchase asignable to the LLC once formed it should not take more than a couple of days to set up LLC, your accountant can probably do the state filings and the businesses you describe you should be able to use a boiler plate multi- member LLC operational agreement and read through it and amend if necessary. Good luck!
I would put under contract with available funds like @Cameron Skinner suggests. Hopefully you or somebody knows whether your're establishing an LLC or an S-corp. They are NOT the same.
@Steve Vaughan while you are right that S-corps and LLCs are not the same, she could be referring to having an LLC that chooses to be taxed as an S-corp.
thank you all for responding...Nicole B is right...it's an llc taxed as an s-corp
As said, get it under contract. In most states you can get one set up in a day or two. As for the taxes, they're all going to be personal income tax anyway, and if you've got less than say $50k in profits the tax savings available from the "payroll vs profit distributions" (which is the main advantage of the LLC being taxed as an S-corp) will be minimal, or non existent anyway.
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