LLC Vs. Inc.?
Can anyone tell me if there is an advantage of forming and LLC vs. an Inc. in investing? I just recently incorportated and looked at both options, however didn't see much difference. Should I have formed an LLC instead?
Nobody can answer my question???
I'm not a financial expert and really only a CPA familiar with your investment strategy and current tax situation can recommend one over the other.
However, from what I've read:
LLC for flipping (buying/selling)
S-Corp for long term holds/rentals
Read through the Law/Legal forum posts and the Tax/Tax Strategies forum for more info.
Andy
Thanks Andy, appreciate the input from a fellow Chicagoan!
"arytkatz" If I'm not mistaken it's the other way around, i.e. you should use an LLC for holding properties for rentals and a corp for flipping.
[addsig]
I currently have an S Corp for flipping and several LLCs for rentals. Depending on your state, you will most likely still have to bay the 15.3%+ self employment tax if you flip with an LLC (on earnings up to $80,400/yr). If you are operating in several states, either setup a separate LLC in each state, or use an S corp and file as a foreign corp in the other states. There is not much case law for LLCs operating across state lines. I'd still recommend talking with a good accountant and attourney before getting too involved, their high fees will be worth it once you get sued, trust me.
Thanks for all the input guys! I tell you, this site is absolutely fantastic! It's a must for every investor. No matter how much experience one may have, there's always something new to learn and odds are, a member of this site has been through it and has the answer.
Thanks again
Quote:
arytkatz wrote:
However, from what I've read:
LLC for flipping (buying/selling)
S-Corp for long term holds/rentals
Actually it is exactly the opposite. Long term holds and rentals create passive income. S Corps are restricted to not have any more than 25% of their total income as passive. It will be dissolved by IRS if you do from what I understand. So you would want an S Corp for flipping and then if you have rentals, put them in an LLC.
This is interesting, as I'm looking for my first rehab without a corp. I guess this means I'll end up paying higher taxes? :-?
Not necessarily, you may get hit with self-employment taxes, but an accountant can help you with that. The key is that you will be opening up yourself to direct liability if someone gets injured at or sues the property. If you have no assets to protect, that may not concern you. But trust me that after you successfully flip a few and hold a few as rentals you will have plenty of assets to protect! I've flipped about 50 this year so far and have only held 4 (this is my first year too), but I suspect I'll hold a lot more toward the end of the year for depreciation benefits.
50 properties this year? Way to go JoeMac! Share some insight.