TAXES
When I start flipping property on the assignment contract. How do i calculate my taxes that i have to pay ? and do i need to set up a l.l.c before i begin for protection ?
When I start flipping property on the assignment contract. How do i calculate my taxes that i have to pay ? and do i need to set up a l.l.c before i begin for protection ?
Assignment fees are taxed at the same rate as your other ordinary income.
There is no requirement that you use a business entity such as an LLC for your assignment deals. The liability protection that you may need, and therefore the business entity that you should form to conduct your business, should be decided after a detailed examination by both your personal tax advisor and your CPA.
There is not a stock answer to this question, since each person's financial condition, net worth, investment approach, and level of investing experience is different. What may be the correct business entity for one investor may not apply to your situation at all.[ Edited by DaveT on Date 12/23/2002 ]
I have used 31 percent as a number to hold back in my REI sales and place it in an interest baring account till the big tax time hits. To date this number has protected me in all my deals.
The very first step you should undertake is setting up your business structure, It is highly advisable to consider a Limited Liability Company or a s-corporation even if you will be the sole owner. Both of these organizational structures will offer you protection against lawsuits. If a liability suit arises the company is liable, not you (except in cases of gross negligence). In either a sole proprietorship or general partnership it is possible for plaintiffs to sue you and either take or put a lien on your personal assets. In most cases setting up an LLC is preferable over that of a s-corporation due to its simplicity in structure and in handling taxes. Basically and LLC allows you the same personal liability protections as that of a s-corporation but allows you to operate in the same manner as a general partnership.
The best place to start in obtaining information in regards to business classifications is
1. http://www.sba.gov/
2. http://www.uspto.gov/
3. http://www.irs.gov/
4. http://www.score.com/
I have found William Bronchick's (AKA Bill) "Generate Instant Cash Profits in Real Estate"
to be a great resource people interested in flipping. http://www.thecreativeinvestor.com/ChanPart-BillBronchick.html
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