Tax Implications Of S-corp Vs. LLC

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I know S-corps and LLCs operate similarly with s-corps requiring more documentation, etc. My question is: Are the tax rates different for an s-corp than for an LLC? Part of me thinks I should know this, and maybe I do, and after reading posts for the last hour, my mind is just mush!

Thanks for any responses!

Comments(8)

  • spurge0n9th January, 2004

    I believe that they are both pass-thru entities.

    S-Corps are cheaper to maintain in NC, however ($75/yr vs. $225/yr).

    And with S Corps, I think that creditors can get a hold of your shares and vote themselves a dividend if you default. There's no shares to grab with an LLC.

  • SuperCat14th January, 2004

    It is very important to get good advice on your particular state.

    One good example is TN as you don't want an S-Corp there as the profits are taxed at 6%. While an LLC that is treated as a partnership federally doesn't have to pay this tax, but the extra profit over your wages is subject to FICA in an LLC.

  • norrist14th January, 2004

    Find a good (REI-familiar) CPA/Tax advisor with whom to work. Thay can be an invaluable "team" member. Best move we ever made was to add a Tax advisor to ours!

  • team_co_op15th January, 2004

    Assuming you are looking at a seperate entity to hold property you would want to choose the LLC. Capital gains will eat you alive in the S-Corp.

  • Blueboy19th February, 2004

    Does anybody know the tax-rate of LLC's vs. S-corps in California. I heard that S-corps were taxed on 1.5% of gross profits, where LLC's were much higher. Is this true?? Any advice on which is better for a small business (500k-800k gross profit)? <IMG SRC="images/forum/smilies/icon_confused.gif"> [ Edited by Blueboy on Date 02/19/2004 ]

  • AcquisitionCorp19th February, 2004

    Team Co Op,

    Are you implying that there are no capital gains assessed to a LLC?

    With any entity you can avoid your ****Must Reach Freshman Investor status before posting URL's***ains by using the 1031 Exchange, but I didn't know that you could actually escape paying them.

    In my opinion, S-Corps aren't as bad as everyone says. If you plan on using your money rather steadily (between reinvestments and assets (a new H2, portable computers, your "reasonable" wage, etc.) then you can easily justify why you made minimal profit.

    Just my two pennys.

    -Nick
    Acquisition Investment Corp

  • pspiers19th February, 2004

    I run my day to day overhead through my s-corp. All my RE investments are held by my LLC. The s-corp's main source of revenue is from commisions paid by the LLC when I buy and/or sell property.

    I know its complicated. You need a great accountant who understands RE investing.

    The purpose of this structure is:

    1. Reduce SE tax.
    2. Capture LT capital gains.
    3. Defend investor classification (do not want to be classified as a dealer)

  • minara25th February, 2004

    I hope this isnt outside the scope of this thread. But what is the Difference between an LLC electing to be taxed as an S-Corp and just a full-blown S-Corp.

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