I am a total newbie to RE investing and as I understand it the best liability protection and tax benefits come in the form of investing as a company, rather than using your own name. My question is, if I want to begin investing (flipping foreclosures, primarily, then maybe moving on to buying rental properties) am I better off starting my own company as an LLC or an S-Corp?
Why is one better than the other? Specifically, which makes more sense tax-wise? Thanks
There is no difference from a tax perspective. An LLC can be taxed as an s-corp.
there are no “magic tax benefits” from an entity, contrary to what the infomercials that sell them would tell you.
that said, LLC’s are much more flexible in how you can choose (and change) your taxation and have less “hassle factor” than corporations, including S-corps. No annual meetings, minutes, etc are required.
Also a corp of any flavor provides zero charging order protection. Understanding that any protection of the LLC depends on many factors - but at least it can provide protection if properly setup and operated. an S-corp can never provide charging order protection under any circumstances. corporate stock is considered an “investment” that can be used to satisfy judgements. BLL can elaborate more.
Thank you for the info…can you please elaborate a bit more on what you mean by “charging order protection”? I’m just not familiar with this term yet.
Charging order protection protects partners from personal liability of other partners. It is a complicated topic and you shouldn’t even think about a setting up an LLC until you have a through understanding of it and the many other issues with LLC .
there are a ton A TON - of these types of threads on this site. omg - forget about it.
check them out by searching a little.