What type of Entity to use when Fixing and Flipping Real Estate?

Question

What type of business entity (LLC, S-corp, C-Corp, etc.) does everyone use when fixing and flipping properties? Any advice on setting up a business entity for fixing and flipping real estate? Thanks.

Bob Okenwa · Answer

@Garrett Gasser

First off, I'm neither an attorney nor CPA and these will always be the people to give the best advice on such a subject. With that being said, I've recently asked this question to a CPA and he advised me to go with an LLC. S-Corp is a tax election and I was told it really didn't make sense for my 2 partners and I off the jump as we would need to be turning a profit worthy of splitting 3 ways (at least 120k he said) that would justify looking like a reasonable salary. You don't want to mess with C-Corps as you may endure double taxation if you pay out dividends from your profits. It's a sticky situation and I didn't go to school for all of that. I'm a software guy so legality and entity structure are best left to those who do it for a living. Always reach out to your local professionals and request a free consultation on the subject to get the best advice for your business in your area.

Brenda B. · Answer

Great question! Itiel Latova, in my research in the counties I invest in, I've seen it done both ways- why is it best to put it my name and then transfer it to the LLC after closing? Couldn't I just close on a property as the LLC and not make the transfer?

Linda Weygant · Answer

It really depends on a whole host of stuff.  Some of the angles to consider:

1.  What are your other sources of income both personally and within your marriage/significant relationship?

2.  What are your long term retirement goals?

3.  What profit levels are you shooting for in the short term and the long term?

4.  What is your tolerance for "corporate governance" paperwork, rules and meeting criteria?

5.  If you're in partnership, how would your partners answer all of the above?

Talk to a real estate savvy CPA about all of these topics and have them outline a plan and strategy for you.  There is no cookie cutter approach to this.

What type of Entity to use when Fixing and Flipping Real Estate?

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