S-Corp vs LLC for REI

4 Replies

Hi everyone,

Hope you all are doing great. First, I want to thank the folks here on BP it's wonderful to be able to speak to so many people who are willing to share good information with each other.

I come from an investment banking background but am now focusing on REI. I am currently looking to form my legal entity for my REI company and one of the CPA's that I spoke to mentioned that an S Corp may be a better fit for me than an LLC. Because of the passive income of an s Corp vs the LLC which may be individual income taxes. Not sure if it's because I'm single and don't have a partner but was wondering if any of you have experience in this area? Or what have you done for your companies?

I plan on working buy and hold strategies to build my portfolio and may even take advantage of some rehab or fix and flip. My goal is to take advantage of any tax rules in favor of either the LLC or s Corp to allow for lower liabilities and increase the cash flow.

Thanks in advance guys.

Cheers,
Edwin Diaz

Originally posted by @Ed D. :

Hi everyone,

Hope you all are doing great. First, I want to thank the folks here on BP it's wonderful to be able to speak to so many people who are willing to share good information with each other.

I come from an investment banking background but am now focusing on REI. I am currently looking to form my legal entity for my REI company and one of the CPA's that I spoke to mentioned that an S Corp may be a better fit for me than an LLC. Because of the passive income of an s Corp vs the LLC which may be individual income taxes. Not sure if it's because I'm single and don't have a partner but was wondering if any of you have experience in this area? Or what have you done for your companies?

I plan on working buy and hold strategies to build my portfolio and may even take advantage of some rehab or fix and flip. My goal is to take advantage of any tax rules in favor of either the LLC or s Corp to allow for lower liabilities and increase the cash flow.

Thanks in advance guys.

Cheers,
Edwin Diaz

You know you can be both - LLC's can be classified as single membered / disregarded entity; single-membered / Corporation; multi-membered / Corp or multi-membered Partnership. After/If you choose to be an LLC with the State, you complete a Form 8832 entity classification document with the IRS to choose. If you don't choose and you are the only member they will likely consider your company a disregarded entity. Multi-members have to choose - partnership or corporation, as there are business filing requirements for both. Here's a copy of the IRS form. https://www.irs.gov/pub/irs-pdf/f8832.pdf

Kudos,

Mary

Originally posted by @Ed D. :

Hi everyone,

Hope you all are doing great. First, I want to thank the folks here on BP it's wonderful to be able to speak to so many people who are willing to share good information with each other.

I come from an investment banking background but am now focusing on REI. I am currently looking to form my legal entity for my REI company and one of the CPA's that I spoke to mentioned that an S Corp may be a better fit for me than an LLC. Because of the passive income of an s Corp vs the LLC which may be individual income taxes. Not sure if it's because I'm single and don't have a partner but was wondering if any of you have experience in this area? Or what have you done for your companies?

I plan on working buy and hold strategies to build my portfolio and may even take advantage of some rehab or fix and flip. My goal is to take advantage of any tax rules in favor of either the LLC or s Corp to allow for lower liabilities and increase the cash flow.

Thanks in advance guys.

Cheers,
Edwin Diaz

AN LLC is a disregarded entity, which means the Federal Government does not recognize it. That said it can be taxed in any number of ways. How LLCs Can Be Taxed.

You can have your LLC Taxed as an S-corp or partnership, disregaeded or even as a C-corp.  That said, the question of which is better may be a good question for an attorney like @Derek Martin or @Jerry W.

If you are the only person in your business and you do not plan on adding many you might consider what is called a closed corporation or LLC. They are also sometimes called closely held entities. They are just like an S Corp or an LLC but they have limits on how many people can be in them and often the stock is restricted so that no one can sell or buy shares without the approval of the other members. The stock must have written restrictions saying that resale of the stock may be limited. The reason I like them is that there is no statutory duty to hold annual meetings like regular business entities have. As far as form I like a Sub S corp as it gives a bit more flexibility on taxes and you can sell or buy shares of stock to add or remove members. Keep in mind that corporate laws differ from state to state so it would be wise to check with an attorney in your state.