S Corp as a Real Estate Agent

5 Replies

Hi All,

I have a question about LLC's, S Corps, and C Corps.

I work as a real estate agent in Washington DC and want to corporate myself for tax reasons.  What are the guidelines for where I am allowed to start my S Corporation.  Do I have to start it in Washington DC?  Also, what benefits does it have in terms of tax write offs, tax savings, etc.?  

Any advice is greatly appreciated!

Cassidy Burns, Real Estate Agent in MD (#SP98377167)

    @Pat Hiban had a CPA on an episode of his podcast in the last few months. I remember in the show they mentioned that the tax court had recently rules that real estate agents could not be an S-corp.  Im not positive that it is the episode below, but Id check it out.  Also @Brandon Hall is a CPA who specializes in all things real estate, so he is likely a good resource.

    https://hibandigital.com/costly-tax-mistakes/

    https://hibandigital.com/craigcody/

    Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353) and Massachusetts (#9​0​5​2​3​4​6)

    @Cassidy Burns

    The state of formation is a question for an attorney, and I'm not one. Typically you form an LLC in the state where you operate (DC) and request that the LLC is treated as an S-corp for tax purposes. If you form it elsewhere for asset protection reasons, then you probably have to register it as a "foreign LLC" in DC. Look at this article and then consult an attorney.

    As far as tax benefits of S-corporation - you do not get any additional deductions. In fact, it can complicate things and even hurt you if you are not careful with how you operate it - specifically in separating corporate and personal money.

    Where it can possibly help you is in reducing self-employment tax, however it's a sticky and controversial issue. Check out this old discussion here on BP.

    @Cassidy Burns funny you should mention that, I own an S-Corp of which I am the sole employee and pay myself a salary. Please note *** I will mention I am not an attorney nor a tax professional so I am not giving you advice. *** So you should talk to a tax professional, but I take my salary and I take an owner distribution as the S-Corp is profitable and I am a shareholder. I can write off my employee (me) expenses. So, my wages are taxed by social sec etc., but my distributions as a shareholder are not. 

    Also, I have checks (like commission) made out to the S-Corp

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