Hiring my Contracting Business to Removate Investments

[Jonathan Duhon]

I am a real estate agent and a residential contractor. To date, I have worked in both full time. In my contracting business, I have recently brought working for other people to a very manageable level so that I can spend more time focused on real estate sales and marketing and investing. We are in the middle of our first big live in flip/house hack and our first rental renovation.

I have been working to organize everything to limit my public exposure and decrease my taxable income. I know I don't "need to" operate through LLC's yet but I want to start clean. My question is, as an investor (or the manager of an LLC who owns and manages investment properties) is it better for me to hire my contracting business to do the work and charge the investment company a small fee, or am I better off paying my specialty tradesmen directly? An obvious advantage is more layers of protection and insurance. But from a tax and legal perspective, does it make more sense to formally hire my contracting company? Thanks for your input.

[Wayne Brooks]

I’d say no. 
—-For the rentals, whatever you pay your llc contracting company….you just converted passive income to self employment income. 
—For the live in glop, absolutely not….there is no deduction on your personal end (assuming you keep it 2 years for section 121) so any payments you make to your llc just become taxable income, with no write off on the personal side.