Which one of these would be best when wholesaling, and what are the differences between them? Obviously I would like to know which one would offer me the best tax breaks???
I would go with LLC, because its not actually a corporation. The problem with a corporation is you get taxed twice. The corporation gets taxed for income and you get taxed for taking money out of the corporation. The good thing is that when you take money out that money is a write off for the corporation. As you know though, just because it is a write off doesn't mean that the corporation doesn't get taxed for all of it. It still gets taxed for some of it. Thats where the double taxing comes from.
An LLC is not a corporation, it is a company, however it is still its own seperate entity. This company is basically a partnership. This gives you the ability to use such escape clauses on your contract as:
This contract is expressly subject to and conditional upon my partners approval.
I'm not an expert and this is just my opinion. To be honest you could get the same tax problem with an LLC, I'm not sure.
The income in a C corporation is taxed twice, once when the corporation earns it and again when the corporation pays it out to you as a dividend.
The income in an S corporation is taxed, in essence, only once. An S corp is taxed like a partnership, no corporate level taxes are due. When the corporation earns the money, all the income passes through to the shareholders each year.
A LLC is taxed like a partnership or a S corporation. I.e. the tax consequences pass through to the partners on a form K1
So, if you did not plan to take any of the profits out of the company for a long time you might very well elect to put together a C corp for your wholesaling operation. Keep rolling your profits with 1031 exchanges and the corporation does not have to recognize the profits and pay taxes thereon for a long time. If you wish to take some money out pay it to yourself as salary or consulting fees which are deductable to the corporation as expenses and you've eliminated the double taxation issue. Allow equity to build up in the corporation and you may find lenders willing to lend without your personal guarantee.
The point is that its a complicated issue, you need to understand all the ramifacations or hire a professional who does.
I would go with LLC, because its not actually a corporation. The problem with a corporation is you get taxed twice. The corporation gets taxed for income and you get taxed for taking money out of the corporation. The good thing is that when you take money out that money is a write off for the corporation. As you know though, just because it is a write off doesn't mean that the corporation doesn't get taxed for all of it. It still gets taxed for some of it. Thats where the double taxing comes from.
An LLC is not a corporation, it is a company, however it is still its own seperate entity. This company is basically a partnership. This gives you the ability to use such escape clauses on your contract as:
This contract is expressly subject to and conditional upon my partners approval.
I'm not an expert and this is just my opinion. To be honest you could get the same tax problem with an LLC, I'm not sure.
Tom Stewart
[addsig]
The income in a C corporation is taxed twice, once when the corporation earns it and again when the corporation pays it out to you as a dividend.
The income in an S corporation is taxed, in essence, only once. An S corp is taxed like a partnership, no corporate level taxes are due. When the corporation earns the money, all the income passes through to the shareholders each year.
A LLC is taxed like a partnership or a S corporation. I.e. the tax consequences pass through to the partners on a form K1
So, if you did not plan to take any of the profits out of the company for a long time you might very well elect to put together a C corp for your wholesaling operation. Keep rolling your profits with 1031 exchanges and the corporation does not have to recognize the profits and pay taxes thereon for a long time. If you wish to take some money out pay it to yourself as salary or consulting fees which are deductable to the corporation as expenses and you've eliminated the double taxation issue. Allow equity to build up in the corporation and you may find lenders willing to lend without your personal guarantee.
The point is that its a complicated issue, you need to understand all the ramifacations or hire a professional who does.