All Forum Posts by: Imran Shahzad

The benefit of a S Corporation is that you can reduce self-employment tax on your flipping income. You can form a LLC and elect to be taxed as a S Corporation.

Hey @Imran Shahzad - speak to your CPA or accountant about the best situation for you. 

If you're just starting out, it really shouldn't matter. 

If you're asking in terms of which entity type will be better to get financing for, again, it wouldn't really matter. 

Hard money lenders will focus more on the property and the operator's experience itself before agreeing to financing terms. 

Consider your individual circumstances while picking between a S Corporation and an LLC for house flipping. An LLC gives liability protection and flexibility, whereas a S Corporation may provide tax benefits. Consult a legal or financial specialist to ensure that your option is consistent with your goals, risk tolerance, and tax strategy.

@Imran Shahzad

While flipping profits are taxed as ordinary income at your marginal rate and subject to self employment tax, I wouldn't go crazy trying to reduce your se tax liability with a S corp.  Declaring a S Corp status means you will have more filing costs.  For just one person, the savings aren't always there --- serious consult a qualified professional or two and get the numbers.

Furthermore, if you have a decent current job, you may already max out or close to max out the self employment / fica tax anyway. Also, you need to do a fair amount of flipping profit to make it worth it to have the S Corp. If you stop or slow down, you have higher costs with your LLC declared asa S Corp.

Investors do use one LLC per flip. You tend to name the LLC the street address of the flip. On the contract your write the buyer as "Imran Shahzad or an entity to be formed" so you can create the entity after you get under contract. I don't know where you are investing, but costs for opening and closing a LLC can be minimal, but I guess it may depend on your State and perhaps how you do it.

Good luck.

Thank you David, sound advice, appreciate you taking your time to explain this to a new person like me. My Accountant has advised an LLC and that is what I am going to do.

 DO you have a deal ? If not why are you worrying about this ? Do you have contractors? 

@Imran Shahzad does your CPA know there is a cost to open and close individual LLC's?

That is pretty horrible advice. One LLC for flipping homes that holds one or two properties at a time is all you need. Plus you will want to see YOY earnings in the LLC.

My advice is you need a new CPA.