I did some research a while back and came up with this as the the most common answers. if you are going to hold and rent, LLC. rehab and flip S or C Corp. This is also what my CPA came up with, but ask yours
S or C. If you earn a lot, C is better b/c the first $150K (I think... Not sure on the amount) tax at corporate rate. The disadvantage is you have to pay Self Employment and double taxation. S is better for smaller size b/c you can avoid Self Employment tax and double taxation, but you are tax at your tax bracket.
Quote:S or C. If you earn a lot, C is better b/c the first $150K (I think... Not sure on the amount) tax at corporate rate. The disadvantage is you have to pay Self Employment and double taxation. S is better for smaller size b/c you can avoid Self Employment tax and double taxation, but you are tax at your tax bracket.
ew86,
For the C-corp, all net income is taxed at the corporate tax rates. The rate is progressive, starting at 15% on the first $50K, 25% on the next $25K, 35% on the next $25K, and so on. The double taxation only applies to dividends paid by the company to the shareholders.
S-corp avoids double taxation on dividends paid, but payroll taxes still apply to amount taken as a reasonable salary. If no salary is taken, then the entire net income from the S-corp will be treated as self-employment income and taxed accordingly.
Most investors use a corporation ("S" or "C"
for wholesale/rehab
Consult your CPA which entity is better for your personal situation.
I really appreciate your answer. Very helpful!
Nate
I did some research a while back and came up with this as the the most common answers. if you are going to hold and rent, LLC. rehab and flip S or C Corp. This is also what my CPA came up with, but ask yours
S or C. If you earn a lot, C is better b/c the first $150K (I think... Not sure on the amount) tax at corporate rate. The disadvantage is you have to pay Self Employment and double taxation. S is better for smaller size b/c you can avoid Self Employment tax and double taxation, but you are tax at your tax bracket.
Quote:S or C. If you earn a lot, C is better b/c the first $150K (I think... Not sure on the amount) tax at corporate rate. The disadvantage is you have to pay Self Employment and double taxation. S is better for smaller size b/c you can avoid Self Employment tax and double taxation, but you are tax at your tax bracket.
ew86,
For the C-corp, all net income is taxed at the corporate tax rates. The rate is progressive, starting at 15% on the first $50K, 25% on the next $25K, 35% on the next $25K, and so on. The double taxation only applies to dividends paid by the company to the shareholders.
S-corp avoids double taxation on dividends paid, but payroll taxes still apply to amount taken as a reasonable salary. If no salary is taken, then the entire net income from the S-corp will be treated as self-employment income and taxed accordingly.