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!

@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/

@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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