All Forum Posts by: Naseer Khan

@Jake Gaines If you can share your business goals, perhaps we can assess your situation and determine whether the S Corp or LLC is right for your business model.

@Daniel Harris Welcome Daniel.  A lot of Bay Area investors are investing out of state (for obvious reasons) and I think it's a great way to leverage your capital. If you have any questions about legal issues with out of state investing, feel free to reach out. 

@James Hull Welcome. This is a great place to learn all about real estate investing and the different points of views are fun to read. If you need any help from a real estate investor friendly attorney, feel free to reach out. 

@Don Souza My practice primarily focuses on real estate investors and I work with a lot of newbies to help get them started. We help new investors get started with business entities, tax advice, contracts and general guidance that is tailored to the specific area the investor is looking to establish. Feel free to reach out. 

If you form an out of state LLC, you will have to register as a "foreign registered" business in California if you conduct business in California (including buying investment property). As such, you will be subject to the California LLC franchise tax, along with out of state LLC fees.

I've worked with AJ Gupta in the past and he's a great real estate attorney. 

I'd like to hear how a land trust actually provides asset protection (without having to read a guru book or another thread).  From my understanding, It's essentially a revocable trust, which does not offer asset protection. In terms of anonymity, its a great tool but I dont see where the liability protection comes from. 

@Catherine Ashley In terms of liability, the LLC and S Corp are the same. As for accounting, read @Dave Toelkes response above - he explains well. 

@Catherine Ashley It really depends on what you want to accomplish with the S Corp. If your income from the 3-4 flips is minimal, then the S Corp is not going to help you much.  However, your accountants may have failed to consider the liability protection of the S Corp, which can protect your personal assets in the case of a lawsuit. What are the odds of getting into a lawsuit? Its hard to say with a few casual flipping projects but perhaps a child gets hurt on one of your properties that is under construction, perhaps a prospective buyer gets hurt during a preview, etc.  As an attorney, I think of all the "what if" scenarios but in realty the likelihood of those "what if" scenarios could be small. 

So, to answer your question - the tax benefits of the S Corp are minimal for someone like you but in terms of liability, it really comes down to how risk averse are you and how careful you are. 

What did the CPA from your meet up suggest to you? 

This response neither constitutes legal or tax advice nor establishes an attorney-client relationship. Inquirers must seek the advice of their own legal counsel prior to undertaking any course of action related to this inquiry.

@Bony Mathew Unless you plan to pursue other real estate related businesses or invest out-of-state, I really dont see the point of having a management company. It just seems like an extra unnecessary step since the income flows directly to you through the LLCs. 

But if you decide to have one, then I think a C Corp with an S Corp Election is the better way to go. (Note: an S Corp is not an entity per se but an election to be treated differently by the IRS). When you choose the S Corp election, whether through an LLC or a C Corp, you have to abide by the S Corp rules (less than 100 shareholders, only 1 type of stock, etc). The C Corp is structured similarly to the S Corp (stock certificates, shareholders), which means less internal changes to the Entity. However, the LLC is structured differently in that it has members (vs. shareholders) and an operating agreement (vs. Corporate Bylaws) and all of that will need to be changed to abide by the S Corp rules.

This response neither constitutes legal or tax advice nor establishes an attorney-client relationship. Inquirers must seek the advice of their own legal counsel prior to undertaking any course of action related to this inquiry.

@Trudy Pachon If you still need help with the LLC, let me know. I lived in San Diego for 8 years and I travel there frequently from the Bay Area (where I live now). I know this may sound biased but I dont recommend using the online services because there are a lot of questions that need answering when establishing the LLC and a few extra bucks spent now, can save you a lot in the future. I work with a lot of real estate investors and I can guide you through the process.