entity for flipping house, next two years hold retal propoty

[Catherine Ashley]

which type entity for flipping house, next two years hold rental property should we form? my husband has a property maintenance (DVA), should we open another one for the flipping house? LLC?S? C?

which one will be easy to get loan from bank?

which one will save tax?

which one will protect our own assets?

thank you

[Naseer Khan]

@Catherine Ashley The type of entity that you choose depends on what you will be doing within that entity. If you are simply looking to buy and hold, then an LLC is perfect for that since rental income is considered passive income and not subject to self-employment tax (unless you are considered a "real estate professional" - see this article Active vs Passive Income) 

If you are going to be flipping houses, then an LLC with an S Corp designation will provide you with the most tax benefits because you will be able to reduce your self-employment tax with proper accounting.

A C Corp is not something you need as an average investor, as that entity has additional requirements/restrictions and is subject to corporate tax (unless you elect the S Corp status).  

An LLC will provide you with liability protection because it will separate your personal assets from your business assets, so long as you follow the guidelines of maintaining a proper LLC structure.

An LLC is considered a flow through entity, so there is no additional tax at the entity level and all income flows directly to you, as if the entity is not even there. If you choose the S Corp election, then you can possibly reduce your taxes more, depending on your business structure (see above).

Regarding loans - some lenders are reluctant to loan to an LLC and will require a personal guarantee from you.

Let me know if I can help in any other way - I am an attorney and an investor, so I understand a lot of the issues that you will be facing.  

This response neither constitutes legal advice nor establishes an attorney-client relationship. Inquirers must seek the advice of their own legal counsel prior to undertaking any course of action related to this inquiry.