can I convert my existed s-Corp to hold properties?

Hello -

I own and operate an s-Corp that has been used as a one-person consulting business since 2001. The business has been profitable every year, has several years of good business credit with a Paydex, D&B, high credit scores, perfect clean paperwork, etc. I’m a full time employee of the business.

I’m starting to look at ways to finance real estate investments here in Denver. I am familiar with the in’s and out’s of taxes as it pertains to LLC’s and Corps and it seems easy enough to create an LLC to hold a real estate investment.

But, I doubt that a brand new LLC would be able to qualify for any kind of a loan. It occurred to me that I have a healthy, seasoned Corp with good credit at my disposal and there is nothing in the corporate charter that would prevent it from moving into the RE business (I’d still use it for consulting purposes).

Is this kind of an approach worth considering? I like the idea of being able to borrow money through the corp - if that’s even remotely possible in the current lending environment.

Any thoughts on this? I have heard some griping about how long it takes to build business credit, and it occurred to me that I might be able to take advantage of the business that I already own.

Any input appreciated :slight_smile:
thanks! - Dave

You can do it, but you expose each business to the liability of the other by running both through the same entity.

Hmm you’re implying to play a double role to make double profit. This is not right and think if you are caught by federal jurisdiction.

That is definitely a consideration. This company has been very active in the past, but these days I only use it for my personal consulting work. There isn’t all that much liability and I have to carry 10 million in professional/error and omission/umbrella against the company because it’s a requirement for the type of government consulting I do.

My hope would be to leverage this seasoned corp to actually obtain the loan without signing a personal guarantee, but perhaps I could transfer actual ownership of the property to an LLC which would own and operate the property.

I read and reread your first sentence and I still can’t understand what it means, but I’m certainly not implying anything illegal or unethical. I’m merely trying to find out if I can use my well-established corp to obtain credit to purchase properties. So, if I am caught by a ‘federal jurisdiction’ (?) I should be fine.

On the other side, your consulting revenue can be used to pay for any judgments due to the investment property.

You maybe better off shifting your current business to a new company. Use the current company for investing and the new company for consulting. You maybe able to keep the same business name so your clients do not get confused if you set it up with a DBA. Check with your CPA??

Actually that was my first idea, since my little consulting practice operates in cash and will be just fine with a new corp. But, for convenience the CPA thought it might be fine to purchase the property using the existing corp, then create an LLC and transfer ownership of the property to the LLC. Taxwise, it works out about the same but I can leave all of my books, etc. intact.

I spoke with a lender and they seemed to think it would be no problem to get a mortgage at an attractive, so this is looking good.