Opinions needed on when to incorporate

[Kathryn Bennett]

Hello everyone,

I am looking for some opinions regarding incorporating. I currently only have one investment property and I'm seriously wanting to start a property management company alongside REI. I've been told to operate as a sole proprietor until I have actual assets to protect/income from the business. I don't want to make the mistake of setting up an LLC or S-Corp too late and running into problems, but I don't want to deal with fees and a ton of paperwork for a business that isn't creating income yet. Has anyone dealt with this before that can give me insight? I'm pretty new to all of this, so suggestions are greatly appreciated and I'm focused on learning more information everyday.

[Ned Carey]

@Kathryn Bennett What I do, is flips in an LLC with an election to be taxed as an S-Corp, Rentals are held in an LLC. A C-corp can be used as a management company.

Generally it is not a good idea to have flips and rentals in the same company. The IRS could consider you a "Dealer" and take away many of the tax advantages of rentals. 

Financing will be harder and more expensive in an entity. That is because you are moving into commercial loans. Good "Credit" for your company is not that important because you will be expected to sign personally for everything anyway. 

There are a lot of options and it depends on your particular circumstances. I recommend the books and website from NOLO Press.   They have a lot of self help legal books. I don't recommend you do it yourself, but being educated on the issues will help you get more out of any time you spend with an attorney.