Hello All--I am a new agent as well as new to this forum...

I am in the state of Maryland, when I was taking the course the instructor advised us to get LLC for tax advantages. Just wanted to know your opinion.

It may or may not make sense depending on your income and expenses. Ask your accountant.

yea, advise a CPA. I have a book out: ultimatebasictraining.com and I couldnt do an LLC because if i lumped both my businesses together both of them would be liable in case someone wanted to sue me, so i had to incorporate.
I would highly suggest you see the Small Business Development Center, they analyze your situation for free and give you free advise. I am sure there is a location near you, i see them every week

What your instructor is talking about is reducing your (self employment tax) as agents we are considered independant contractors.If you form a llc you can have 50 percent dividends in the corporation and then 50 percent claimed as income.The first 1 to 2 years of business the irs expects you to have a loss so some people write off everything but i think they can still audit you for up to 7 years on those returns (i don't know the exact amount of time).When you write off everyhting you are more likely to get hit with an audit by the irs,this is why some people put the dividends at 50/and the salary at 50 because it can lessen your chances that you will get audited.You can incorporate yourself for about 150.00 it's not that hard to do.


Key point:if you decide to incorporate and use an accountant,make sure you are using one that knows real estate and investing.

Example our company uses a guy that all he does is investment and real estate for agents,he knows information that a typical accountant or tax attorney does not know because he specializes in this field everyday helping agents and brokers with there tax matters.

not giving legal advice

good luck

Thank you all for the wonderful advise. I am so worried about the finances I should be out there marketing!!

ive incorporated into an LLC. i will later add a C corporation to my line.

my C corp will be the parent managing my multiple LLCs (child)

i would talk to someone who knows corporate structuring and a professional CPA who does real estate and investments.

this will save you alot of money if you seek professional advice first.

alvin, i cant think of a more expensive way to manage a business than to have LLCs managed by a C corp, did an attorney tell you do to this?

no. just been reading it on investment law forums. im talking to a corporate consultant this month.

im mainly having multiple LLCs for different investments attached with umbrella policies.

Individual LLCs for the following
Rehab
Rentals
Paper notes
Commercial
Syndication
Development

I dont want to put all my eggs in one basket and lose it all to a lawsuit.

Alvin, i think maybe you should talk to an attorney. Your in california, you have to prepay taxes on an LLC, $800/piece. Not only that, but if someone sue's you over your paper notes business, your profits are liable in all your other businesses. Why in the world are you creating so many divisions? You can just keep them as one business and just keep separate finances.

im still looking for an attorney that does real estate and investments. any recommendations?

yes i know about the $800/piece. but i think the capital we're raising will cover the payments.

why would all our profits be liable in all my other businesses since theyre separate entities?

i am keeping them under one business which will be a C-Corp.

hey mike what kind of investments do you do in CA?

i dont do investments, i work with investors almost exclusively though.

The last time i saw a post from you, you were debating whether you should stay in the business because of lack of sales. Now you want to start 6 different divisions in your business and not worried about the extraordinary taxes you will be paying structuring your business like that. What do you contribute your turn around too? Are you a part of a team now...whats the deal?

I would not recommend entity development for any new real estate agent other than possibly a cheap PA. Reason being that more than 90% will not make a go of the business and the funds and time required to administer the paperwork, although minimal for LLC and S-Corp it is extensive for C-Corps and a newbie would probably be better served actually attempting to DO Real Estate rather than get side tracked doing make work work...

My preferences is to have a Land Trust within a LLC for most investment activities and within a S-corp for business activities. I would never recommend a C-corp to any small business... ever and know of no knowledgeable CPA that would.

thanks realty check.

we're actually going to start up the C corp when we have 4 LLC's at its full potential.

each property that we do acquire, we are planning to put them in the land trust,secured by the LLC.

right now we only have 1 LLC which is for rehabs only. when we reach our capital target, we will start on the 2nd LLC.

we have our vision drawn into a flowcart of multiple LLCs and the C corp. let me know if you want to see it, its in MS visio format.

my vision is to have 6+ divisions. but we're focusing on 1 right now which are rehabs in CA. theres no point in starting all 6 at the same time since we will lose focus and the quality of our business. all 6 divisions are part of our 10 year business plan. after we're comfortable with rehabs, we will start the 2nd LLC within 2 years with rentals/cashflow acquisitions outside CA.

we're still looking for a reputable CPA to structure our taxes. before we buy properties, we do our due diligence with terms, exit strategies, appraisals, inspections, construction costs, project duration, capital gains tax, closing costs, expenses, etc. we itemize each potential deal and crunch the numbers to see if they make sense for us to venture into the deal.

in terms of the LLC, i teamed up with 3 investors/co-owners who strictly do rehabs. we acquire property, fix and i list them since im the only one licensed. this way i can market myself and the listings.

Alvin,
How many properties have you bought and sold for clients?