LLC, S-LLC, Corporation? Where to start?

Question

I've bought and flipped 2 houses over the past few years and now I'm moving into rentals.  I'm operating primarily out of the Texas foothill region but will be expanding to Kansas City in the next year.  I know I need to open an LLC, or something along that vein, but would love any advice on whether to go with an LLC, S-LLC, corporation, S-Corp...something else?  Any and all advice is welcome, thank you!

Natalie Kolodij · Answer

Depends on what you'll be doing moving forward

I would have 2 separate companies set up 1 for flipping and 1 for rentals.

They are different types of income, taxed differently, and you can't be strategic with either if combined.

I would always keep rentals in an LLC either single or multi member if you have a partner.

Flips in an LLC and once you hit about $70k income for a year talk to your tax pro about if adding an S election to that LLC makes sense. Don't start with an S corp - in the beginning it would cost you more than save you.

Kim Tucker · Answer

You need to consult with your cpa for your own finances.  But in general I see the flipping business being held in an llc taxed as an S Corp so you can pay yourself payroll and standard payroll taxes.  Then the rentals held in an llc.  But you may have other financial concerns that might dictate something else.  Please don't make a decision based on our forum advice.

William Carpenter · Answer

I would lean to agreeing with @Natalie Kolodij on the overall general structure. I have the same setup for a client, llc(s) for different rentals and investments / ownership, and and then consider the s-Corp once the income is high enough to justify the impact of wages and SE taxes. I tend to look at consistent net above the $70K depending on the individual circumstance, but does help limit the SE tax exposure with this.

Noah Jenks · Answer

Thank you @Kim Tucker!  Yes, I will absolutely be talking with my CPA, it's nice to get advice from many avenues.

Nicolas Lopez · Answer

@Noah Jenks im going with llc Nickyrealtyhomes.LLC

Noah Jenks · Answer

Interesting @Ned Carey, thank you for the help!  I agree with owning them in my own name, not a route I want to go down.  It may be easier to not set up an LLC now and do it later, but could potentially cause big issues down the road.  Better to start with a solid foundation.

Ned Carey · Answer

To add to what @Natalie Kolodij said you can form an LLC and elect to have it taxes as an S Corp.  An LLC is a little easier to run.  A C Corp (or traditional corporation) is a terrible way to own real estate. There are both tax and legal issues to consider.

A viable choice is no separate entity and to own properties in your own name. Use insurance to cover your liability. That is not a choice I would make, but many here do.

Noah Jenks · Answer

Thank you Natalie, this is a huge help!

LLC, S-LLC, Corporation? Where to start?

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