OfflineI am just getting started and have a question for those who have formed companies for their real estate investing business ... which structure is the best to go with?
I've heard of many people forming LLCs and S corporations and i'm sure there are other entities which would work too. Along with what structure is the best, is there a better state to form it in?
Assuming some of the answer depends on situation and goals - here is what i can offer up currently:
My wife and I will be the only people involved in the business at this point, but expect to bring on more people as the business gets going.
We are interested in all the types of deals that Dean and his students have outlined in the books, but are less likely to buy and hold properties at this point.
Thanks for any input!!
holding property. S-corps for flipping property.
I've had S Corps since 1981. Any Corp is for liability protection. We have rentals & do flips with our S Corp and still in our personal name. The S Corp reverts any profit or any loss back to the stock holders (which is usually you & your partner/wife, etc.). You can draw salaries or not; have employees or not. I would suggest you talk to an account before you decide.
I personally would advise to wait until you have done a few deals & have extra money since the costs are not just to form the corp, but additional expenses for payroll, accounting, separate tax returns, & most creditors will still want you to sign personal guarantees so if the corp doesn't re-pay the debt, you will.
Thanks for the feedback, i appreciate it!
While it is wise to start thinking about S-Corps or LLC. I would suggest as Gary did, that you get a few deals under your belt before you jump into the next step of your REI career.
You would be wise to consult your attorney and accountant about the next moves you should make. Costs to set up LLC's and S-Corp's vary from state to state. Here in NY it runs roughly $1000 to set up a LLC.
Just a bit of advice to help you along.....Jan