Soooooooo silly question, but I thought I'd ask.The general concept of LLCs I understand, but what I'm struggling with is at which point would you want to classify your LLC as a Corp? The personal tax rate even at the high end of the tax table is higher than highest rate at the corporate level.
So say your taxable yearly income from your 9-5 is 50K + say 5K from your rental properties...the 5K will be "pass through" as you'll complete the 1040C form ...but say rather than 5K is 50K, is it worth classifying your LLC as a corp. in this case because you won't want to pass that 50K as personal income to avoid the personal income tax...?
I guess my question is at which point do you say...I no longer want to pay personal income tax on profits from my rentals? Quite honestly now that I write this out, I don't see the huge advantage of the LLC to begin with even if it is 5K - - why would I wan to pay personal income tax on those 5 grand...am I missing something...( i just got my self confused...smh)
hope this makes sense.
The corp comes into play when earning 'active' income. If you are flipping, consulting, managing, wholesaling, etc.
RE is passive, so no SE tax. It's the SE tax you are trying to get help with inside a corp.
Makes sense on the double taxation. Make perfect sense, and appreciate the feedback.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Get the Ultimate Beginner's Guide
Sign up today to receive the popular eBook for free!