I would like to start by saying this is not my first rodeo but this is the first time I am faced with these circumstances. I have flipped houses before, with and without partners for the short term. Had a LLC and S Corp etc..
However this time I have someone that wants to go in an even 50 to 50 split on everything. I can do it without them but I think this will allow the business to grow faster. However, I have a few concerns.
I am a higher risk taker, I like choosing the properties, I know a lot more than this person since I have performed flips for years. Yes, I know taking on a partner has it drawbacks however I was thinking there may be a way to only be in a partnership for only particular properties.
Of course one way we could do it is form a S Corp and only go in together on the properties we want to share the profit. However, how can I pass the profit to lets say another S Corp with very minimal tax losses. This would allow the money to be made as a partnership in lets say S Corp A, pass the profits to S Corp B which I have sole control over and can invest how I see fit. My concern is double taxation, the income is taxed when moving from Corp A to B, then taxed as income from Corp B
Another option is each of us own our own S Corp, we buy the houses as 50% owners. Then sell and split the profits. My concern is the profits taxed at a higher rate because they are split between two corps without showing losses which may not be realized by the other corp. An example my Corp "Corp A' put more money into material cost and also pays for more labor. Therefore those are Corp A tax deductions. Can the profit be split then it is up to each individual to show profit and losses for their 50% or does it have to be calculated prior.
I am trying to think outside the box. Does anyone have any ideas for me to have a 100% ownership in a company and allow profit to transfer through with a lower tax rate. Each owner would have their own expenses, deductions etc..
Any ideas and discussions are welcome!
Has no one ever dealt with this before?
I was thinking we both would own separate S Corps, but what happens when it comes to taxes. Are their any negatives?
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