S-Corp Vs LLC For Partnering??
I've heard so much regarding doing a S-corp vs LLC for real estate investments. Which entity would you guys prefer if my partners and I are just starting out and will get into flipping first to generate some cash flow? We have regular jobs right now and will do this on the side until we are able to generate enough cash. For just tax purposes, is a S-corp better than a LLC? The one advantage of a S-corp is that there is no self-employment tax. Please give some feedback.
What about a partnership? Organize your LLC as a partnership.
Talk to a CPA regarding your tax laws. I've read S-corps are better for flipping. However, given your particular situation, a CPA will be able to explain everything to you and set you up in the best way. I have a LLC, but I operate like an S-Corp.
Don't ask questions on how this works, that's what the CPA's are there for. Find a good one and they will be able to explain everything to you.
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I just started an S corp to build duplexes with a partner. I had my lawyer talk with my accountant and they decided on an S corp. I believe you should do your own research into both types. They both are similair in their liability and tax benefits. Once you know about both options, talk it over with the experts on taxes and legal issues in order to help you decide.
WERC
Any attorney that practices in the real estate area should understand the legal and tax implications of any entity they establish. I have seen way too many entities come across my desk that were supposed to be taxed one way and the operating agreement stated something completely different. Typically you see this with LLCs. An attorney reads that an LLC can be taxed as an S-Corporation so he tells his client to talk to his CPA. The attorney drafts the LLC and the agreement states that it is a partnership and the CPA elects to treat it as a Corporation. Big problem... Your post raises a number of issues that should be addressed from both investors perspective. One investor may need income and the other losses, or you may need both. Also, what happens if your partnership falls apart ... who gets what? Many issues that most CPAs (in my experience) do not understand and far too many attorneys turn a blind eye to when it come to taxation.
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