Advice Needed on Incorporating Decisions

Advice Needed on Incorporating Decisions

Buffalo, NY · Member since 2018 · 2 posts · 0 votes

Hello, In deciding to exit the Rat race, I have decided (After a full year of research) to purchase a franchise. I am using the ROBS program to create a C-Corp (Yes I am using an expert in this to assist) to purchase it from my IRA without creating a debt. I was planning on still having 50% of my IRA remaining to continue to grow, in addition to 100% of my wife's. Along came an opportunity through a friend to purchase a house that easily values @ $180,000 for $115,000(purchase price). The owner's mother passed away a few weeks ago and they want to sell asap for cash and get back to Florida. Without wanting to miss out I signed the agreement to purchase the house, put $1,000 down and put it under what will be my C-Corp name. I am reconsidering if I should hold the flip under the C-Corp or perhaps create a NEW LLC or S-CORP, take out a SBA Loan, fund the house, and pay back the loan immediately and have access to the profits for a future flip or to re-invest. This would allow for me to still leave 50% in my IRA and not fully deplete, also perhaps would lead to a greater tax savings?

*Looking for advice and to have this question answered- If I kept everything under the C-Corp would I pay the Capital Gains tax and then pay an income tax personally (double taxation) Or will I not need to pay the C-Corp Tax as long as I pay myself the wage asap?

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  • Brian EastmanPro Member
    Self Directed IRA & 401k Advisor · Wenatchee, WA · Member since 2014 · 2k+ posts · 2k+ votes
    7y

    @Matthew Gardiner

    Have you discussed this with your ROBS provider?  Using a corporation formed for the intention of purchasing a franchise to flip a house is probably a really bad idea, unless the franchise is a real estate development/flipping business.  Your new business will come with the liability risk of the real estate flip attached, among other complications.

    If the corporation flips the house, then the gains will be taxable to the corporation.  You will also be taxed on any salary you draw from the corporation.

    This sounds to me like a real cart before the horse scenario, and I strongly suggest you get your legal and tax team on board before making any additional moves.

  • Buffalo, NY · Member since 2018 · 2 posts · 0 votes
    7y

    Thanks Brian, perhaps it would make more sense to purchase the house under an LLC (form one now) and seek a SBA loan and payback after sale?

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