Real Estate agent incorporate as LLC? Feasible?

Question

My wife is planning on becoming real estate agent part time in the beginning. Seems like if she incorporates as an LLC it may help limit liability and also introduce tax benefits. Is it worth it?

Steven Hamilton II · Answer

@Peter Fokas,

Unless she is becoming an independent broker that will not be possible.  She would have to be taxed as a sole proprietor unless she is a managing broker.  The reason is RE agent income is "Statutory employee" income. Basically they are working underneath someone else and paid for what they produce.  If she had agents below her that were working for her that could be another story but case law, puts a standalone agent working under a broker as a Schedule C.

Joel Owens · Answer

2 different components to the entity creation. One is the structure of the asset protection and the other is the tax liability.

LLC's are usually cheapest and easiest to form at least in my state of GA so many use them over other methods.

The liability protection and the tax advantages are sometimes at odds with each other so you have to find the right balance based on what you are trying to do. With the entity piercing the corporate veil is possible but usually an entity creation makes people go away more as they want the low picking fruit (no asset protection).

Bill Gulley · Answer

Any RE agency entity must also have a license, for that, you need to be a broker. Get insurance, the broker has an E&O policy on each deal that is closed, she needs to look at a professional liability policy for deals that don't close, but the broker will generally have her covered there as well. Bring up the insurance coverage with the broker she goes to work for. You don't need a business entity IMO, especially starting out. :)

Wayne Brooks · Answer

Peter, listen to Steve.  She Is an independent contractor, but the work is as an individual, not as an entity.  Also, she will have E & O insurance.

Peter Fokas · Answer

I thought a real estate agent can be considered an independent contractor hence can be a treated as a sole propietor or an LLC. I know a single entity LLC is not really recognized but then all you need is to have more than one member to the LLC.  S-corp I do not know the details about.

Stephanie Dupuis · Answer

Yes, use insurance to protect yourself. Ask your CPA which entity to use for taxes. I'm using an S Corp. There's also protections with an S Corp.

Bill Jacobsen · Answer

As Joe said, use insurance to protect yourself.  Most agents make minimum wage or less to begin.  This will especially true if the work is part time.

As she makes more she can incorporate as a PC.  The main benefit, in my opinion is to pay yourself a salary which is subject to SS tax while distributions from the corporation are not.  Your CPA can tell you what the minimum salary should be.

Good Luck in the new business.

Bill

Account Closed · Answer

To limit your liability is a good insurance policy.

Joe Gore

Real Estate agent incorporate as LLC? Feasible?

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