C-corp Advantage?
Any legal types have insight into this: My plan calls for reinvesting all the cashflow into more properties. I'm thinking I might be better off w/ a C-corp as opposed to an LLC because with an LLC I'd have to pay personal income tax on the cashflow before I re-invest, whereas with a C corp I could just re-invest the income before it's "taxable profit". Is my thinking right here? 
Hi Luna,
Just a quick thought. I own a C-Corp and I have been advised by a number of Attorneys, and companies that set up corporations, and my tax accountant to never put Real Estate into a C-Corp. One of the reason is that if you are using the C-Corp as a holding place for your Real Estate investments, you could be classified by the IRS as having a "Personal Holding Company"(IRS taxes you at 39.6%) and immediately lose your veil that keeps the distance between you and the entity of the C-Corp. A Personal Holding Company is "a corporation that has been established for the main purpose of collecting dividends, interest, and other solely passive investment income." (Loop Holes for the Rich, Diane Kennedy, p.230). C-Corps are for larger amounts of money coming through businesses and not designed for investors. The LLC is by far the best avenue. The LLC is still a corporation and the great part about it is that you can chose for it to function similar to a C-Corp or an S-Corp which filters back through your personal finances (S-Corp is great if you need the tax break personally). Check with an Attorney that specializes in Asset Protection. I have an Attorney that I use in California. I just met with him about three weeks ago. Also, in litigation, a C-Corp can lose what it has---even its property. In contrast, in the LLC, you greatly reduce the amount someone can get (which is outgo - what is being paid out) and they cannot get your property. If your LLC is designed for retirement purposes, and nothing is going out at the time, they cannot get anything out of your LLC. Most Attorneys will not even pursue a lawsuit against someone who is protected by the LLC (being that the lawsuit is connect to some item involved in the LLC). Thus, the reason for not putting property in a C-Corp, is that better protection is provided in a Limited Liability Corporation. Also, with an LLC you have more freedom now-a-days to design the structure of your LLC as you wish. My Attorney told me that it is the difference between having a choice of vanilla or chocolate, or having to choose from many flavors and toppings as well -- thus, an LLC will protect, save you on taxes, since it is a separate entity within itself (this means you make money, spend it, and pay taxes on what is left over - usually if that is under $50,000 in the account it is about 15.7% that is the amount of taxes to be paid) and is able to hold your passive income investment, either Real Estate, Tax Lien Certificates, or Stock you have purchased. Time and time again I have been warned by Attorneys, companies, and tax accounts, and CPA's, to never put property or stock purchases in a C-Corp since it is fair game for any lawsuit. Check out Diane Kennedy's book (it is mentioned here on the TCI website under Robert Kiyosaki--Diane is his personal CPA). The book is Loop-Holes of the Rich, chapters 20 - 28. Hope this helps Luna!
Gajlee,
Thanks for the info. It's people like you that make this board great.
You are very welcome, Luna, I am so glad I could help out!
Blessings to you,
Gary
I would add one thing to this. In deciding on weather to go with LLC vs. C-Corp it would depend on how long you hold the properties. If you typically hold the properties for less than a year (i.e. rehabbing or otherwise flipping) then a C-corp my not be a bad way to go. With a C-corp you can fully deduct expenses much more easily, such as medical or dependent care, whereas you can only deduct a small percentage with LLCs and S-Corps. Also the first 75K of income in a C-corp is only taxed at 10%, so you can achieve tax savings. And although there is the infamous "double taxation" with a C-corp, the recent drop in dividend taxes may make paying yourself a dividend from a C-corp a better tax decision, depending on your situation. Just something to think about.
Luna: there is some information in this message-thread that I do not believe is completely accurate. There are some huge vulnerabilities in LLC's (especially single member LLCs). Please be careful.
Bottomline: there are a host of factors in creating one (or more) entities in which you will do business. The two main factors are: protection from liability and managing tax implications. What will work for one business in one state will not necessarily work for another in the same state.
1] Do extensive research. 2] Corraborate, corraborate, corraborate and 3] then see a tax attorney who is experienced in well protected and tax-lean corporate structures. It will save you money in the long run, and potentially all your personal savings as well.
Hope this helps. Good luck to you all!
REIMan
This is true in some states one person LLCs are not allowed, most people get around this by forming the LLC with their spouse. LLCs are a relatively new business entity and thus by many lawyers not considered as "court tested" in liability protection as corporations. Only time will tell if LLCs live up to their billing. Hope that helps.