For Tax Lien/ Tax deed investing as well as flips what is the most efficient way to protect my assets and to get the best tax consequences?
Hi,
An LLC is a flow through tax entity able to distribute profits without the double taxation of a C - Corporation.
An S - Corporation acts in much the same way but has clear differences like control by board of directors versus managing member.
Consult a tax professional in your state, he may recommend a consultation with an attorney but start there.
GR
In either LLC or C or S corr, be sure you have more than one person, you and wife are one. lots of cases where the corporate veil is pierced.
REASON…if you are only person to protect and you do something wrong…why should it protect ONLY YOu?
Tax Liens are a cash business. Been doing it since 1988.
It like all other real estate is fraught with problems.
You can buy meth houses…try and clean up one of them…ask me how I know.
You can buy swamp land, unusable lots, have seen same 6 X 2000 strip os excess highway bought over and over and it is WORTHLESS.
Do not get into the business thinking you are going to get one of those $257,900 houses for taxes. That AINT gonna happen.
Buy the liens for the penalties and interest.
Where I invest you get 18 percent per year and a mere $500,000 invested will pay you $90,000 in interest for a weeks work of attending and bidding at the sale.
I DO NOT BID ONLINE AT ALL!!!
Used to be very nice business but now is DOG-EAT-DOG…lots of financial institutions are now in the game.
CAVEAT EMPTOR
Get in small, the water can be3VERY deep.
Good Luck
Welcome to the game.
Using corporations to protect assets and for tax advantages can make economic sense, however, the one negative is that the entity (corporation, llc, etc.) requires a specific tax return each year. One can accomplish the same benefits using a trust and trust law rather than a corporation without having the requirement of a specific tax return for that trust entity.
Not suggesting to evade the issues here; just saying that one less exposure to such an aggressive organization is favorable. Do your taxes the way one would do individually and use a trust to protect assets.
As far as tax advantages, one could expense items out of a trust in a similar fashion to a corporation.
Hope this helps.
Rob
No entity type has tax advantages over another. Business expenses are always deductible. Personal expenses are never deductible.
No entity magically changes non deductible personal expenses to deductible business expenses. Never.
The ONLY possible exception is that S-corp MAY allow you to save some social security/medicare tax IF the company has sufficient free cash flow to pay a reasonable salary plus distributions.
M