LLC vs LLC treated as S-Corp

[Tanya Jayakom]

Hi Everyone!

My name is Tanya and I'm a newbie in RE Market. I'm planning on setting up an LLC for my wholesaling/flipping/creative financing business. I've read some Guru's books talking about LLC treated as S-Corp. And I'm not quite get the differences between LLC and LLC treated as S-Corp.

Here are my questions:

1. What is(are) the difference(s) between these two?

2. Pros and Cons of both?

3. What are the cost of both?

4. Due to my investing purpose (wholesaling/flipping/creative financing), which one I should go with? LLC or LLC treated as S-Corp?

Your answer will be greatly appreciated!

Happy Investing! 

- Tanya :)

[Phil B.]

Im an LLC S-Corp election.

The main difference is the way earnings are taxed. With an S-Corp election earnings are passed through to the owner in the form of wages and/or distributions and distributions aren't taxed for FICA and Medicare. With a regular LLC all earnings are passed to you as income and you have to pay tax on the whole amount as far as I understand it.

Applying for a tax ID is free on the IRS web site and so is the S-Corp election. I usually file both at the same time. Your state might have a fee to set up an LLC. Here in FL it was $125 or $175 I think it was - not a crazy amount.

As far as what's best for you, I can't answer that one.  I would really run that by an accountant to see what he or she says is best for your individual situation.