All Forum Posts by: Joe Fermin

I agree with Brandon.  You only need an S corp if you are running a real estate business.  It could be the business of real estate that gives you the tax advantage you are looking for.  For example if your real estate empire earns you $100K, but you only need a salary of $70k to live on, then you wouldn't have to pay any additional FICA tax on the remaining 30K.  

To Linda's point, if you're looking to determine whether to put your rentals straight into an LLC or an S-Corp (traditionally formed), then from an asset protection standpoint, this is typically not recommended. For various reasons, but the primary being that a corporation (whether it's a S-Corp or C-Corp) is owned through shares that are issued initially and more (typically) can be issued for future stakes in the corporation. Whereas, an LLC has ownership interests based on the member(s) that own the LLC in varying percentages. Transfer of ownership interests becomes a burden as well. Ultimately, the question that needs to be asked is: 1) are you asking about forming a Corporation from the outset and electing it to be an S-Corp? Or 2) putting title into an LLC which is then treated as an S-Corp?

If it's the second question, you would want to determine (with a real estate specific CPA) if the LLC (which would own your property) should be treated as an S-Corp (for tax purposes only).

There's always legal and tax considerations, and sometimes they clash, but not always. An LLC can give you the flexibility to hold legal title to a property, while utilizing the S-Corp tax treatment (if justified, as others mentioned above).

The general advice is to hold properties in LLC's and have operations in an S-Corp if your ordinary business income is above $40k. Again, that is general advice and you should consult with an accountant or lawyer to discuss you specific situation. Check out Mark Kohler. He talks about the "trifecta" for protecting assets and providing general tax benefits.

There is no Tax Savings of holding rentals in S corps and huge tax downfalls. 

You almost never want rentals in S corps. 

Read "Tax free wealth" by Tom Wheelwright. A lot of knowledge about all this.

If these are rental properties then please, please, please, repeat after me:

NO RENTALS IN S-CORP!

@Natalie Kolodij - how about a picture of your T-shirt?

If you are starting out then I would form a simple LLC disregarded entity and when you get a high enough income and don't want to pay so much self-employment tax then convert that LLC to an S-corp which is simple and just a piece of paper that you elect to be taxed as S-corp. If you do elect S-corp then you have to pay yourself earned income.

Hi Joe,

You would typically want to seek advice from an accountant on if a s-corp is right for you but an LLC can be treated either as a disregarded entity or can elect to be taxed as a s-corp. Some people elect for the s-corp status but it really only helps once you reach a certain income level.