Wanting to know if i should become an LLC and do all of my RE transactions in it? If so any profit i make in the LLC how do i pay myself? Thanks
what are you going to do? owning investment property comes with some risks. an LLC is one way to reduce those risks.
you pay yourself by writing a check as “distribution of profits”
Thanks for the responc. My wife and I will be rehabing houses at the begining and maybe collect a rental but not interested in that yet. My wife will not be doing very much in the company except giving her opinion on properties. My goal is to have enough exp. to quit my job and compensate that income w/ RE. But before i buy a property have a few qustions on setting up my LLC.
Partnership or S- Corp
Distubution of profit
3)Do I put my house in a trust ( hse has mrtg, but have 20 acres of land that is paid for) to keep any chance of loss onit?
- do I need a Attny to draw up these contracts or do I.
Other questions to but these are the main questions i can think of.
Thanks for any help, and by the way mcwagner data is one of my FAVORITES thanks
Probably an LLC treated as an S-Corporation to minimize self-employment/social security taxes, depends on how much you are making at the job & how much you will make with sales. You will need to pay a salary (I recommend a person at paychex who is very good), the lower that can be reasonably paid the better, b/c the salary is subject to social security tax. Any profit earned & not paid out as salary can normally be distributed to the owners without tax consequences.
You can create the entity and start on contracts, but an attorney should at least review your work. I do not see where a trust is necessary or even very beneficial - I’ve posted a lot on that topic on this forum.
Thank You for the info
One more question. If my household income is around 100k and i still stay w/ it while doing p/t REI why would I not just pay myself by distribution for now until i quit and decide to take a salary. My fear of taking salary, even a small one would cause more head aches than what I need now. Although I do want to set up this business the right way. My hope is to be doing this F/T in about 3 years. But this could happen faster. I just prefer to look before I leap.
I’d need to know your W-2 income & how much you figure you’ll make on flips in first year…household income doesn’t tell me what I need to know.
Last year W-2 was 60k I expect 40k to 50k first year
You should consider forming a S Corporation to minimize taxes. LLC’s are generally treated as a Parternship or Sole Propriertorship. LLC’s are different than S Corporations check out http://www.instantinc.us/pdf%20files/Incorporation%20Newsletter-1.pdf
LLC’s can be taxed as a sole proprietorship, partnership, C-corp or S-corp. See the IRS website for details.
From IRS Website
An LLC that has only a single member and is not required to be classified as a corporation will automatically default to the classification of disregarded entity. The disregarded entity files as a sole proprietorship and completes the appropriate schedules as part of the single owners Form 1040.
Yes, from the IRS website:
“If the LLC has only one owner, it will automatically be treated as if it were a sole proprietorship (referred to as an entity to be disregarded as separate from its owner), unless an election is made to be treated as a corporation.” “The election referred to is made using the Form 8832.”
yes, LLC’s are very flexible in how they are taxed. that’s one of the reasons why I like them.
single member LLC can be disregarded (sole proprietor 1040 Sch C) or corporation, including S-corp.
multi-member can be partnership or corporation, including S-corp.
Note that how you choose your taxation does not change that the entity is still an LLC, it is only a tax decision.