Business Structure

[Frankie Corona]

What is the best corporation to incorporate yourself in when investing in real estate? And why?

[David Dachtera]

@Frankie Corona,

The key is: "Control everything, own nothing".

Here's what we do in my investing group. Our instructor on this is Mark Kohler of KKOS Lawyers(.com).

1. Set up a trust with you as the beneficiary. This isolates you from your business entity structure and vice versa.

2. Set up an S-Corp. This is how you will receive income. Use the salary/dividend split (1:2) to reduce tax liabilities. The Trust is the first owner of the S-Corp.

3. Set up an LLC. This is the entity in which you will hold long-term investments like income property. The S-Corp is one member of the LLC, the trust is the other. The LLC is, therefore, multi-member and has better protection.

4. Make sure your businesses are insured.

5. Begin building credit in the S-Corp and LLC (each should have its own EIN). Lenders like to see at least two years in business. You've already got that clock ticking. Get a DUNS number for each entity. Get Net-30s and other tradelines in your entities. Use them and pay them faithfully. After year two, start applying for business credit cards. (Make SURE they do NOT report to your personal credit if they require a personal guarantee! The Capital One SPARK Card is known to have this flaw.)

6. Add LLCs to limit the amount of equity held in any one LLC.

That's the basics. Consult a tax attorney / tax accountant for the rest.

Mark Kohler is a JD Tax Attorney and CPA Tax Accountant. 

I, however, am NOT a financial or legal professional and this is NOT legal or financial advice. Do your own research and due diligence.

David J Dachtera