What Is The Best Type Of Company To Form?
Pardon the newbie question....but am partnering with a good friend of mine and we need to know what is the best type of business structure to form that will afford us the best tax breaks and least liabilities. We are very excited about pre-forclosures. I am a mortgage broker and my partner is a realtor. Any guidance or information is greatly appreciated. 
What are you going to do with the acquired properties? This will likely dictate or guide your choice of business entity.
Thank you for your response. Our intention is to prepare each home for market and sell. At some point down the road we may entertain holding and offering lease option. We each own our own business but do not want to blend the REI with our current businesses. We want to keep that separate. Any suggestions are greatly appreciated.
[addsig]
You can find much on the internet about various business structures and their rules. There are two main considerations in making a selection.
1) What is the nature and expected volume of the business entity
2) What is the financial status of the business people
I will keep this very simple just to get you started and mention two classes of business structures-- pass through and non-pass through.
A pass-through means that the income (or loss) is passed through to the owners (partners, members, shareholders, etc.). Rental property may be a good candidate for a pass-through structure, since depreciation for a leveraged investment almost always results in a loss. If an owner makes less than $100K in earned income, up to $25K in passive losses can be deducted from owners earned income for tax purposes. This benefit is reduced linearly until no loss is allowed if earned income exceeds $150K.
Generally, pass-through entities have there tax years the same as the calendar year, so it is not possible to move income from one year to another. LLCs and Subchapter-S corporations are pass-through entities.
Non-pass through structures will pay tax on its profits. Business activities that do not generate passive income such as rehabbing and flipping are usually better off in a non-pass through entity. Otherwise the profits would pass through to the owners and push their taxes higher. Tax rates for these entities is less than that for individuals. The tax year can be selected to coinside with the beginning of any month. C-Corporations are non-pass through.
You should probably consult with an expert before making a choice. The expert can go over your particular plans and situation to help you make a good choice.
There are two books that I like in Kiyosaki "Rich Dad" series.
"Tax Loopholes for the Rich" -- Diane Kennedy
"Real Estate Loopholes" -- Diane Kennedy & Garret Sutton
Perhaps this is of some help to you.
Regards,
Ed