Wholesaling in multiple states. Taxes, Corporations...

Tax, SDIRAs & Cost Segregation
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Wholesaling in multiple states. Taxes, Corporations...

Eddie Starr
Specialist · fremont, NE · Member since 2014 · 161 posts · 42 votes

I've some questions about one of everyone's favorite subjects: taxes and the IRS. I am NOT looking for "legal or similar advise," as I know that can't "be done." I just want to hear what others who've done such business have done for their businesses.

For those who have wholesaled in multiple states, do you use a C-corp, LLC, S-Corp, LLC-S-Corp, LLC-C-Corp, or something else? Do you have a "Master Corporation," and then a separate corporation for each state you do business in? Or do you have your corporation(s) where you do the bulk of your business, and then, for where ever you do a few deals, simply register as a "foreign entity?"

For those that opt to have multiple corporations, do you have someone you know as a registered agent, or do you pay an annual fee to a 3rd party? If the latter, who do you use? Has www.myllc.com or freeregisteredagent.com been good? Any you would avoid, or recommend?

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Steven Hamilton IIPro Member
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
8y
Originally posted by @Eddie Starr:

I've some questions about one of everyone's favorite subjects: taxes and the IRS. I am NOT looking for "legal or similar advise," as I know that can't "be done." I just want to hear what others who've done such business have done for their businesses.

For those who have wholesaled in multiple states, do you use a C-corp, LLC, S-Corp, LLC-S-Corp, LLC-C-Corp, or something else? Do you have a "Master Corporation," and then a separate corporation for each state you do business in? Or do you have your corporation(s) where you do the bulk of your business, and then, for where ever you do a few deals, simply register as a "foreign entity?"

For those that opt to have multiple corporations, do you have someone you know as a registered agent, or do you pay an annual fee to a 3rd party? If the latter, who do you use? Has www.myllc.com or freeregisteredagent.com been good? Any you would avoid, or recommend?

The main thing to do is look at using that same corporation and registering it in each state you are doing business. Yes, you will need a registered agent in the states you do business in. This is how most operate.

Most operate as sole proprietors until they have completed deals since most of the income is subject to self employment tax as it is from person services. The next thing I will mention is those that operate as a different entity typically are not operating their company appropriately when they engage me and then I need to coach them to use their company appropriately and not commingle and to use proper payroll etc.

[email protected]224-381-2660
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  • Steven Hamilton IIPro Member
    Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
    8y
    Originally posted by @Eddie Starr:

    I've some questions about one of everyone's favorite subjects: taxes and the IRS. I am NOT looking for "legal or similar advise," as I know that can't "be done." I just want to hear what others who've done such business have done for their businesses.

    For those who have wholesaled in multiple states, do you use a C-corp, LLC, S-Corp, LLC-S-Corp, LLC-C-Corp, or something else? Do you have a "Master Corporation," and then a separate corporation for each state you do business in? Or do you have your corporation(s) where you do the bulk of your business, and then, for where ever you do a few deals, simply register as a "foreign entity?"

    For those that opt to have multiple corporations, do you have someone you know as a registered agent, or do you pay an annual fee to a 3rd party? If the latter, who do you use? Has www.myllc.com or freeregisteredagent.com been good? Any you would avoid, or recommend?

    The main thing to do is look at using that same corporation and registering it in each state you are doing business. Yes, you will need a registered agent in the states you do business in. This is how most operate.

    Most operate as sole proprietors until they have completed deals since most of the income is subject to self employment tax as it is from person services. The next thing I will mention is those that operate as a different entity typically are not operating their company appropriately when they engage me and then I need to coach them to use their company appropriately and not commingle and to use proper payroll etc.

    [email protected]224-381-2660
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  • Eddie Starr
    OP
    Specialist · fremont, NE · Member since 2014 · 161 posts · 42 votes
    8y

    @Steven Hamilton II:

    Thanks for the feedback. Yes, my plan would be to use the same corporation name, and register it in each state I'm doing business in.

    I'm also aware that one needs to beware not to co-mingle funds; use the business for personal, or visa-versa. This can lead, in short, to "piercing the corporate veil," and any protections the corporation had provided are gone.

    Do you offer services to set up registered agents in multiple states, or is there service you suggest? I've seen how they state they can set up the corporation, for a fee, but I don't see why I should bother with that. I believe all I would need to do is select the RA service, and when I register the LLC with the SOS, use the RA's information. Or is worth the small extra fee to have them do it all?

    Again, thank you, Steven, for 

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  • Kenneth Kappelmeier
    Wesley, AR · Member since 2018 · 1 post · 0 votes
    8y

    I was under the impression that a corporation can own property, buy and sell that entities property, in any state and that you would not have to register that corporation in the state the property is owned. For instance LLC registered in another state and I live in Arkansas and wholesale, I would not be required to register that LLC in Arkansas as well. Is this faulty information?

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  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    8y
    Originally posted by @Kenneth Kappelmeier:

    I was under the impression that a corporation can own property, buy and sell that entities property, in any state and that you would not have to register that corporation in the state the property is owned. For instance LLC registered in another state and I live in Arkansas and wholesale, I would not be required to register that LLC in Arkansas as well. Is this faulty information?

    I'm not an attorney, but your information appears faulty:

    https://law.justia.com/codes/arkansas/2010/title-4/subtitle-3/chapter-27/subchapter-15/t/4-27-1501

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  • Eddie Starr
    OP
    Specialist · fremont, NE · Member since 2014 · 161 posts · 42 votes
    8y

    @Michael Plaks:

    That's generally my understanding. If one is conducting business in a state, they must either register as a foreign entity, or register as an entity in state (through a RA?), if it's not a state they're already registered in..


    Now, my main question is, for those who've done so, since you need to either register as a foreign entity, OR register with an RA service, which have other wholesalers done?


    Is it easier and cost effective to register as a foreign entity, and pay whatever fees the states charge? Or to set up an LLC in each state I do business in, and have a RA?

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    8y

    @Eddie Starr

    Creating more LLC's does create additional costs.

    One additional thing to factor in is how much exposure to lawsuits/liabilities do you have as a wholesaler?
    If its not much - maybe you want to limit it to one LLC and registering as a foreign entity in all the states you do business in instead of opening up multiple LLC's.

    You likely want to consult with an attorney before you go ahead and set it up so he can tell you what liabilities you would be protected from when opening up an LLC.

    [email protected]917-280-8544
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