Holding Entities Regarding my Own Situation

[Zach Lincoln]

I have been reading multiple books on corporate structure I.E. "Incorporate and Grow Rich". I make 100k a year, live off of 40k and would like to invest 60k a year. I understand that I shouldn't hold rental properties directly underneath a C-Corp. However, I do not want my rental property business mixing with my own personal taxes. I was thinking of holding rental properties under LLC's and then have those LLC's be held under a C-Corp. Here is a list of my requirements:

A way to deposit 60k into the corporation tax-free or with no implications

Full Advantage of Business expenses and other forms of deductions. I do not need to give myself a dividend or distribution in any way or form. I am here to grow wealth and live off of my day job. Any luxury bought with said corporation will be justified through a form of business expense.

I would like tax returns separate from my own personal returns.

The ability to possibly raise money from investors in the future(optional)

Essentially have the potential to re-invest all profits tax-free by taking advantage of depreciation ect (I know that this is specific to the properties themselves and not the entity but I want to make sure that a law regarding these types of deduction does not come in the way because of the entity)

Exit strategy. At the end of the 15 years I would like to quit my day job and live off the business. This means that I will need to be able to pay myself through means such as salary or dividend without big tax implications. Big tax implications refer to any taxation around or above the 40% range.

In conclusion I know most people would say "slap that puppy under an llc and get cookin with fire" . However, I am aiming for the longterm and dreaming big so I want a corporate structure that is more complex and utilizes multiple entities for maximized protection and tax savings. A C-Corp with LLC's may and is probably not the best way to accomplish my goals, my main concern in that a C-Corp will fall under PHC Status. Can anyone inform me of the best way to accomplish my goals. It is greatly appreciated.

[Ashish Acharya]

Originally posted by @Zach Lincoln:

I have been reading multiple books on corporate structure I.E. "Incorporate and Grow Rich". I make 100k a year, live off of 40k and would like to invest 60k a year. I understand that I shouldn't hold rental properties directly underneath a C-Corp. However, I do not want my rental property business mixing with my own personal taxes. I was thinking of holding rental properties under LLC's and then have those LLC's be held under a C-Corp. Here is a list of my requirements:

A way to deposit 60k into the corporation tax-free or with no implications

Full Advantage of Business expenses and other forms of deductions. I do not need to give myself a dividend or distribution in any way or form. I am here to grow wealth and live off of my day job. Any luxury bought with said corporation will be justified through a form of business expense.

I would like tax returns separate from my own personal returns.

The ability to possibly raise money from investors in the future(optional)

Essentially have the potential to re-invest all profits tax-free by taking advantage of depreciation ect (I know that this is specific to the properties themselves and not the entity but I want to make sure that a law regarding these types of deduction does not come in the way because of the entity)

Exit strategy. At the end of the 15 years I would like to quit my day job and live off the business. This means that I will need to be able to pay myself through means such as salary or dividend without big tax implications. Big tax implications refer to any taxation around or above the 40% range.

In conclusion I know most people would say "slap that puppy under an llc and get cookin with fire" . However, I am aiming for the longterm and dreaming big so I want a corporate structure that is more complex and utilizes multiple entities for maximized protection and tax savings. A C-Corp with LLC's may and is probably not the best way to accomplish my goals, my main concern in that a C-Corp will fall under PHC Status. Can anyone inform me of the best way to accomplish my goals. It is greatly appreciated.

Zach, 

I think we all get what you are looking for. I have many people with same kind of vision, but in reality it is almost impossible to sustain this when you begin and it also does not make sense financially. 

Right away, two biggest issues are 1) lenders are not going to lend to c Corp or sometimes even LLC. 2) insurance costs are almost double or more.

It’s ok to have a long term vision like that, but you might have to start investing on personal name. You can also get there if the structure you are interested in is right for you. 

As far as C-Corp, you don’t want to do that. You mentioned that you wanted use depreciation, but if you don’t have basis, you cannot use the loses  to minimize taxes. Holding real estate in a Corp does not give debt basis(google debt basis) to deduct the losses. Generally you will pay more taxes, if you will be holding in c -Corp for that reason and may other reasons. 

Also you want the pass trough status to potentially use depreciation to offset you persona income taxes, you can’t do that via C-Corp. 

We work with almost billion dollar funds, and no matter how big they are, we never see C-Corp. You can expand equally via other entities in RE as C-Corp. 

Having taxes separate should not be worries of yours(you actually want them to be combined for tax saving reasons), if you expect to be as big as you want, you will hire professional to take care of your taxes and legal side, so it’s not going to be anything you will be doing. 

There needs deeper discussion with your CPA on this.