LLCs for sales agents and investors

[Megan Crist]

Hey BP people! I recently received my sales agent licence in Ohio and am in the process of setting up an LLC for sales commissions. In the next couple of years, I would also like to flip a home or two in the Columbus area. Should I form a different LLC for this as well, or can I combine these activities together into one entity? Any insight would be appreciated. Thanks!

[Christina Carey]

Hi @Megan Crist. Before I got my broker's license, I used my LLC (with S-corp election) to receive commissions as a salesperson. I also used this entity for flips - essentially, if it was a Schedule C activity, it was done inside the entity. Because the entity was already established, I simply rolled that into being a licensed company (with the ODRE) once I got my broker's license.

Without the S-Corp election, there is no tax benefit to the LLC, as the income all flows through to your Schedule C anyway. If you're looking to keep your name out of the public record in terms of property ownership, the LLC will accomplish that, but only if you have someone other than yourself set it up (like an attorney). Otherwise anyone can look up your entity on the Secretary of State's website and see that the LLC is you.

That said, we also use land trusts for property ownership and anonymity in the public record, but the principal is the same - the beneficiary (owner) of the land trust is still a taxpayer.

One other thing to note, and an attorney or an accountant will tell you this as well. Should you acquire rentals at any point, do NOT mix those long-term holds with your earned income activities. Rentals go in a different basket.

Clearly there is a lot more to this than what I've said here, and I am not an attorney, or an accountant, and everyone's situation is different anyway, so you should spend a few bucks and sit down with one before you do anything - preferably one who is also a real estate investor. I can recommend someone in your neck of the woods who is all three of those things, and he is brilliant. PM me and I'll send you his info.