All Forum Posts by: Richard Z.

It’s been a while didn’t come and post here.:-) hope everyone has a wonderful 2013!

I did a project in 2012 with other two partners (one active on passive no salary for both). By the end of the project I took a small portion as my compensation about $28k (which is specified in the LLC agreement as a percentage of profit before capital distribution). Rest of the profit are distributed per capital contributions, I own capital interest, so I also took about $130k for the profit per capital contribution.

I'm also a realtor so I earned commission when I buy/sell the properties for the LLC. I made about $30k in commission from this project .

Now the issue is about the self employment tax, as I'm manager(active partner) for the LLC, so looks like all of 28k +30k+ 130k are subject to self employment tax. Do I have to pay that amount? Does it make more sense to pay SE only on the 28k+30k? If so will the LLC elect as S-Corp for tax purpose work? If not what's the reasonable rate to pay?

And for planning purpose, how would you set up the partnership/entities to reduce the SE tax? especially with self capital contribution and with passive partners, I prefer all the profit from capital contribution will not need pay SE tax. While a reasonable compensation/percentage of profit is set aside which will subject to SE and specified in the agreement. Will moving all capital contribution to under my wife's name and as passive partner work? Will use a LLC to be the manager and I myself as passive partner hold capital interest work? What's the typical way to set up this ?

Bryan/Charles/Bill,

Thanks a lot for all your valuable input, after reading through your input I believe a LLC entity and an operating agreement will be more suitable for my case. As this investor is more like profit sharing at least for a year period. I also might have other investor/partner coming in if first few cases work out nicely. So how to write up the operating agreement will be very important and there are a lot of things to consider. I will look for an attorney to see how I can structure the agreement.

Hi All,

I'm newbie here not sure if this is the right board to ask this question.

I planned to do the rehab business(buy from truestee sale) for a while, but just short of cash, recently I'm lucky enough convinced a friend to lend me $200k( with my own $100k) to start my rehab business. I proposed 40% as loaned money(no interest :-) ), and 60% as investment money. I gave my friend projected return of each investment flipper generates 20% profit, and 3 projects a year. So total projected return will be about $200k + $72k(60%on $120k).

Now we agree on putting together a gentleman's agreement together. Wonder is there such an existing agreement out there? or can i use a promissory note?

Thanks!

Charles, Thanks for stop by. :-)

I have been interested in real estate for couple of years, I have hand-on experience w/ rehab work mainly from fixing my own house, I spent a lot of efforts learning things in last a few months - I'm getting agent license(for my own use). I have looked at many distressed houses around our area recently, my focus is flipping single family residential w/ a backup plan to rent it out if things doesn't work out. But there are a lot of competition and house are expensive in this area. So I start to look little bit suburb area. If this doesn't work out I will consider out-of-state. I also start to look for either money partner or private lending option.

Hi Everybody,

I'm so glad to find this website. There are tons of information to educate myself and networking!

I'm Iooking forward to connect with Investors here.

Thank You!