Doing business as a Realtor thru your own corporation or LLC

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Doing business as a Realtor thru your own corporation or LLC

Matthew Wright
Investor · Windham, ME · Member since 2016 · 180 posts · 37 votes

As a Realtor should you do business through a Corporation or LLC? Im told S-Corps are preferred, but havent got an explanation as to why. Any agents out there set up their own entity for liability or tax purposes?

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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
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@Dany Namou A CPA like @Brandon Hall would have a better sense of that than I would.  Tax benefits/consequences is something I actually pay a lot less attention to than I should.  All I know is a pay a lot of taxes lol.

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  • Chinmay J.
    Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes
    9y

    @Matthew Wright Mostly tax purposes. If you elect yourself as an S-Corp, you can get around paying at least some of the self employment tax. Work with a qualified CPA for structuring your tax elections. Work with your brokerage to set up your LLC with them, so they cut the commission checks in LLC's name not your name.

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  • Steven Hamilton IIPro Member
    Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
    9y

    @Matthew Wright,

    Ideally you should not unless you are a broker and have other agents working for you. This is because the IRS could reclassify any non wages to wages as reasonable compensation as it was for personal services.

    Make sure your contract with the broker states the corporation or LLCs name. You may run into licensing issues with your state.

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  • Russell BrazilBusiness Member
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    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
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    Im 99% positive that the tax court ruled that an a solo agent/broker can not use an s-corp for agent/brokerage business.  The agents I know who do use an entity use a PLLC. Keep in mind that that an entity does not protect you license from action or liability, at least in the states I do business. 

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  • Dany Namou
    Realtor · Detroit, MI · Member since 2016 · 67 posts · 20 votes
    9y
    Originally posted by @Russell Brazil:

    Im 99% positive that the tax court ruled that an a solo agent/broker can not use an s-corp for agent/brokerage business.  The agents I know who do use an entity use a PLLC. Keep in mind that that an entity does not protect you license from action or liability, at least in the states I do business. 

     Does a PLLC have any tax benefits that a sole proprietor does not? 

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  • Russell BrazilBusiness Member
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    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    9y

    @Dany Namou A CPA like @Brandon Hall would have a better sense of that than I would.  Tax benefits/consequences is something I actually pay a lot less attention to than I should.  All I know is a pay a lot of taxes lol.

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  • Brandon Hall
    CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
    9y

    A PLLC does not offer tax benefits.

    The tax benefits come from operating an S-Corporation. Many of my real estate agent clients do just this and save anywhere between $2,000 and $10,000 annually, on average.

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  • Russell BrazilBusiness Member
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    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
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    I stand corrected

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  • Brandon L.
    Real Estate Agent · Falls Church · Member since 2012 · 2k+ posts · 1k+ votes
    9y

    @Brandon Hall I heard from a mentor that his tax advisor had him form a PLLC but then file taxes as an S corp. Is that possible? 

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  • Brandon Hall
    CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
    9y

    @Brandon L. yes - the only way timeless the S-Corp tax tatusnis to first form an LLC or C-Corp.

    An S-Corp is a tax status. You cannot create an S-Corp without first establishing an LLC or C-Corp that then elects the S status.

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  • Brandon L.
    Real Estate Agent · Falls Church · Member since 2012 · 2k+ posts · 1k+ votes
    9y

    @Brandon Hall thanks for the explanation 

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  • Dawn BrenengenBusiness Member
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    Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes
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    @Russell Brazil  You should talk to Brandon or your own CPA about setting up an Scorp for you.  Big time tax savings can be had.  7.5% of a good potion of your income could be saved.

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  • Edward A.
    Real Estate Agent · Mount Airy, MD · Member since 2014 · 34 posts · 4 votes
    7y

    Who do you go to for setting up a PLLC - I don't see it on Legal Zoom - I assume I should find a CPA or a lawyer?  What do any folks in the Montgomery County MD area recommend - would like to find a good office to help me.

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  • Stanley Bronstein
    Attorney, CPA, Broker & Author · Scottsdale, AZ · Member since 2018 · 532 posts · 488 votes
    7y

    @Edward A.  Every state is different. I would start by talking with your state licensing board and try to get a friendly person in the licensing department to give you a little guidance.

    Then I would probably hire an attorney who's done it for others in your state.

    Do you have any friends who have a PLLC or a PC already?  If so, ask them for referrals.

    Also, depending on how much income you anticipate making from your real estate agent activities, it might behoove you to elect S corp status for your PLLC or PC.  It's more complicated, but it can save you money, if the numbers make sense.

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  • Ramsin Jacob
    Realtor · San Jose, CA · Member since 2018 · 184 posts · 71 votes
    7y
    @Brandon Hall

    Reading through this post now, I have to give credit to Brandon because all of his explanations are very clear and to the point.  Easy to understand.  Thanks for the information. 

    Originally posted by @Brandon Hall:

    @Brandon L. yes - the only way timeless the S-Corp tax tatusnis to first form an LLC or C-Corp.

    An S-Corp is a tax status. You cannot create an S-Corp without first establishing an LLC or C-Corp that then elects the S status.

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