Entity structuring, advice on how I might set up my bussiness

Tax, SDIRAs & Cost Segregation
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Entity structuring, advice on how I might set up my bussiness

Nathan P TannerPro Member
New to Real Estate · Bay Area California · Member since 2022 · 34 posts · 16 votes

Hi everyone my name is Nate, I am in the beginning stages of my RE investing. My first deal is coming fast and I’m looking into businesses structures. I will definitely be choosing a credible CPA to help me with this process but would love to be more educated before I get involved. I am hearing many things about how to hold your investment properties and what tax structure to use. I’m also hearing if I plan on making more or less then 250k per year profit i need to have my tax structure set up accordingly. can someone please shed some light on this topic. I know there can be so many scenarios in what I plan to do long term. But any examples would be amazing.

Also any professionals in the CPA world can reach out to me directly and we can chat as well.

Thank you for your help

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y

@Nathan P Tanner

This is where getting a good attorney and a good cpa will come in handy. As other post mentioned what type of real estate are you doing? I see too many people overthink it and do these complex structures which costs them more money per year for a false sense of security, so make sure you understand as well the structure and ramifications.

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    3y
    Quote from @Nathan P Tanner:

    Hi everyone my name is Nate, I am in the beginning stages of my RE investing. My first deal is coming fast and I’m looking into businesses structures. I will definitely be choosing a credible CPA to help me with this process but would love to be more educated before I get involved. I am hearing many things about how to hold your investment properties and what tax structure to use. I’m also hearing if I plan on making more or less then 250k per year profit i need to have my tax structure set up accordingly. can someone please shed some light on this topic. I know there can be so many scenarios in what I plan to do long term. But any examples would be amazing.

    Also any professionals in the CPA world can reach out to me directly and we can chat as well.

    Thank you for your help


     What will you be doing? Rentals, flips, Notes? 

    If Rentals will you be paying all cash or will you have a mortgage?

    Also an entity may only give you asset protection and no tax benefit depending on what entity structure you need and choose.

    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Nathan P Tanner

    This is where getting a good attorney and a good cpa will come in handy. As other post mentioned what type of real estate are you doing? I see too many people overthink it and do these complex structures which costs them more money per year for a false sense of security, so make sure you understand as well the structure and ramifications.

    7e investments53 Reviews
    WebsiteView Page
    1Reply
  • Nathan P TannerPro Member
    OP
    New to Real Estate · Bay Area California · Member since 2022 · 34 posts · 16 votes
    3y

    @John Underwood I will be paying cash. And that’s the problem I’m trying to understand more. Is what tax structure to use combined with my entity form.

    0Reply
  • Nathan P TannerPro Member
    OP
    New to Real Estate · Bay Area California · Member since 2022 · 34 posts · 16 votes
    3y

    @Chris Seveney Thank you For your reply. I appreciate the help. My plan is finding a credible recommendation of both Attorney and CPA. I will be buying houses cash using the BRRRR method.

    0Reply
  • Account Closed
    Real Estate Agent · Auburn Hills, MI · Member since 2022 · 45 posts · 67 votes
    3y

    Regarding the entity structure If you have an LLC that should be converted to an S-corp if you plan to save on taxes. I am not a tax professional, nor do I know the whole story but I do know once you get into the 6 figure range you would want to lower your tax liability and you can do that by using an S-corp.

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  • Jason Marino
    Attorney · Member since 2022 · 160 posts · 186 votes
    3y

    Hi Nathan,

    As you suggested in your post, the best way to go about this is to speak with an accountant with experience in real estate investing to discuss what the elected status of your entity will be. Additionally, a real estate attorney can help you create that structure and make sure that the Operating Agreement and the formation documents are created in a way that reflects what you need.

    1Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    3y
    Quote from @Account Closed:

    Regarding the entity structure If you have an LLC that should be converted to an S-corp if you plan to save on taxes. I am not a tax professional, nor do I know the whole story but I do know once you get into the 6 figure range you would want to lower your tax liability and you can do that by using an S-corp.

     You are providing really bad tax advice based on his situation.

    [email protected]917-280-8544
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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    3y

    Entities such as an LLC will not necessarily save you on income taxes.
    There is a potential savings on self-employment taxes(Social Security / Medicare) if you have an ordinary business(non rentals) and you have an S-corp setup.

    Best to talk to a CPA for advice before you start doing things on your own.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
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