Will Net 1 million dollars from my business this year, now what?

[Tim Tierney]

Hello-

I am 35 years old, married with two small children (4 and 3). I'm in year 2 of my business (not real estate related), and am projecting to NET over 1 million dollars this year, pre-tax. My plan is to first and foremost use this positive cash flow to scale my business so I can maintain this rate of growth, or at least try too! However, even with an aggressive growth plan in place, I'll still have appx. $500k which will appear on my tax return as income unless I come up with some forward thinking ideas now in order to minimize the tax burden which will come as a result.

So I'd like to accomplish 3 things here:

1) minimize my tax burden for 2016
2) start investing in rental properties
3) make my wife happy with the purchase of a new home for our family

My wife and I own one home; our current residence which we bought for $160k. We still owe $90k on the note. One goal I have is to become a real estate investor. If we purchased a second, more expensive home, made it our primary residence, and then begin renting out the first home. Could I then pay off that 90k note before the end of 2016, and claim it as a deductible business expense? Would it be wise to create a LLC for my real estate company before I do this, and make my wife the majority owner so I can get the same tax benefits as I would get with Biz #3?

Thinking out loud now... Until I add more properties to my portfolio, I'm sure I'd be operating at a loss after all expenses so I guess keeping myself as the majority owner (or not even creating a legal entity for now) would benefit us more in the long run since those losses could lower my income for Biz #1 and Biz #2. Does this sound like a realistic and more importantly logical plan, or I do sound as ignorant as I feel?

Thank you for reading! I gratefully welcome all feedback, especially the criticism, so please do not hold back if you see holes in my plan, or my head!

Sincerely,

tim