formation of a c corporation

[Geoffrey S.]

I received a tip from a friend that taking my properties and incorporating them into a c corporation is the best tax structure for me.  I've got a full time job and, for now, the rentals are supplemental income/retirement fund--netting 25-35K/year before taxes.  Obviously, I'd like to increase that, but that's where I'm at until I feel comfortable venturing out into something else.

I've researched a bit and heard repeatedly that incorporation of my holdings is not something that I should attempt to do on my own--I will need a lawyer.  Friend's lawyer charged him 7K, but quoted me 14K (friend is an expert haggler).  Anyone else done this?  Tips?  S corp is better?  Sole proprietorship is better?  If I'm making this little money, it'll take years to pay off.  Should I bother?  

Should I bother to try to incorporate in one of the tax haven states (Nevada, Delaware, Wyoming, etc.), or just play it straight and pay up and incorporate in business-not-so-friendly California, where I live?  Any advice is appreciated...

[Frank Chin]

How many properties do you own? For liability protection, the usual method is to form an LLC. However, I've been land lording for forty years and owned it personally mitigating my risk with plenty of insurance. Here in NY, when you get sued, attorneys don't care if you have an LLC, C Corp or whatever, they sue the entity and you personally.

Having said that, I did set up a C Corp management company to flow some of my rental income through, not to hold property. That was years ago when I owned rentals and an active business and prior to Obamacare, I cannot charge off medical insurance to my rentals, or to my active business. If I buy insurance for my active business, I also have to cover my employees. Don't recall if it's a federal or state law. So I divert enough income as management fees to my C Corp to cover expenses, mainly medical insurance and co-pays, but not enough for the C Corp to report income for tax purposes. I haven't looked at it for a while, tax laws constantly change, and years back, there was a big disadvantage for C Corp ownership from the capital gains standpoint.

And if you own rentals personally, on death you can pass it on to heirs on a stepped up bases thus saving them capital gains. My dad owned commercial property personally for many years after getting advice if he should from an entity, That was years before LLC's gain popularity.

I don't know incorporation expenses charged in CA, but it sounds high. You're right that it's something that you shouldn't do yourself, though there are websites that helps you do that.