S Corp Question- Real Estate Brokerage

5 Replies


I have an S corp question.  I have an accountant. Senario-- I own a brokerage with 8 agents and I also still personally do residential sales. My agents are 1099'd as they are independent contractors.  The brokerage makes money from brokering the agents and the brokerage makes a profit from the agents for brokerage services.  Since I'm still a selling agents and those commissions aren't part of the income of the brokerage except for the portion of the commission that is owed to the brokerage (just like other agents in the company)--how should the commissions on personal sales be reported? 1099(like other agents in the office)  or salary? Since agents aren't W-2'd what would be considered the correct "salary"?   Thanks!

Call your CPA, everyone's situation is unique.

I've received differing opinions from CPAs. 

I think the issue is not to poll CPAs, but to talk to YOUR CPA.  This is the person who knows your scenario best, understands your retirement goals, other income sources, where you are in your career, etc.  These are all things that would influence how you would structure this.

For example, if you're looking to sell your brokerage soon, I would recommend carving out your commissions from the overall company income. If you're still mid-career and looking to simplify both your taxes and your business structure, I'd start looking into creating the brokerage as an S-Corp, leaving your particular earned commissions in and pulling a salary from the brokerage. But ONLY if your goal is tax savings. If your goal is to maximize your retirement plan contributions with a SEP, then keeping things as a basic LLC might be better.

If you're really concerned about keeping your brokerage and your personal commissions separate, then two separate entities, possibly either 2 S-Corps or a nested S-Corp/LLC structure might be best.

So when tax season is over, sit down with your CPA and outline your goals and your issues and see what they recommend.

Now if what you've got is a data entry/"tax preparer" who simply enters your data into tax forms, consider switching providers.  With the questions you have, you need somebody that can create the best scenario for you, help you maintain it and guide you through changes as your business and life change.

All my income from sales, flips, consulting, or whatever, go into an S-Corp. Then I'm paid a salary and distributions. 

I personally wouldn't want a 1099. If you don't have a CPA you know and trust, I suggest getting  a referral. 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here