we will be equal partners all initially investing the same amount of money. I was thinking of going the GP route since we will all be managing the daily operations of the business in one way or another. but I would like to hear from someone who is more experienced. The business is just for flips, we all are married with salaries in the 60-70k a year range each if that matters.
What is the best way to set this up if we want to minimize our taxes due at the end of the year?
We do NOT plan to pull the profits out. They will be reinvested into the business.
thanks in advance for you guy's help.
Definitely NOT General Partnership... research the state that you are going to register your LLC or Corp in to learn the requirements / protocol for being a multi-member LLC, S-Corp or C-Corp. That will likely be the deciding factor. The state and federal government have different regulations for different entities.
You may need the advice of a tax accountant here as well. First I never advise doing a partnership. Many forms of partnership make all of the partners have UNLIMITED liability for debts of the company, even if they did not cause that debt. Usually a Sub S is the best tax wise for flipping as you can divert some of the income into passive to save on taxes. When you have multiple members I like an LLC. The advantage of an LLC is you can divide profits or losses unequally to ownership percentages if you desire. It will also help protect from adding new members in the event of a death, divorce, bankruptcy, etc. A good LLC must have a VERY good operating agreement for it to be effective. A well drawn LLC is much better than a partnership. No matter what you choose get educated on corporate formalities and how to properly operate one.
Probably the best way is to get rid of the two partners. Then set up an S corp for flipping. That sure would make things easier and more money for you.
@Mary B. , yeah I was researching last night and llc deffinitely looks like the way to go.
@Jerry W. I will definitely hire a professional who is knowledgeable, but I have also heard horror stories from BAD ADVISE, from some "professionals" out there and I wanted to go prepared with some of the advices from you guys here.
Account Closed yeah I know that's the way to go. I have done my first few deals by myself, but at this stage, I feel the need to go in all cash due to me not wanting too much debt over my shoulders (I'm a bit more conservative than some of you guys) plus I have my money tied up in another deal. The partnership will have the option to be dissolved after the first 4 deals together, and by going all cash I can close within a few days and make a much stronger offer to a potential seller. therefore increasing our profits. and at the same time I lower my own risk by splitting 25/25/25/25.
I've been advised by a few attorneys not to do C-Corp unless you're a huge corporation.
For some lower income taxpayers it can be the best option.
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