About to incorporate, have questions. - Posted by Jen(NE)


#1

Posted by JHyre in Ohio on December 31, 1998 at 11:57:23:

An S-Corp is quite similar to an LLC, if slightly less flexible. An S-corp passes income through to its shareholders like an LLC. As such, flipping deals are taxed at your personal rate which is usually greater than the 15% corporate rate (on first $50,000). Using a C-Corporation generally allows you to reinvest 85% of profit, while LLC/S-Corp allows you to reinvest a lower rate, depending upon your personal tax rate. Even though you will face eventual double taxation with the C-Corp, the present value of being able to reinvest most of your profits is often greater than the present value of being taxed once immediately. The higher the return on your reinvestment, the greater the present value of deferring full (but higher) taxation. A number of other VERY subjective and personal factors influence the choice of S-Corp status, so you should talk to a professional and tell them ALL of the facts to ensure the correct choice.


#2

About to incorporate, have questions. - Posted by Jen(NE)

Posted by Jen(NE) on December 30, 1998 at 08:57:57:

I have Bronchick’s courses on incorporating. I have a few questions since I might have missed something. He indicated that it’s better to use a Corp for short term deals and LLC for long-term deals.

I understand the need for a Corp on short-term due to taxes, dealer status etc… But why is a LLC better for rentals as opposed to a Corp? Less paperwork for LLC on taxes and such? Am I missing something why it wouldn’t be as good to hold rentals in a Corp?

I want to own some rentals, work L/Os, and do MH flips. My husband and I both will continue to work. When most of you started out, did you simply form one Corp or LLC and created more Corps/LLCs down the road as your income/assets got larger ----or did you set up 2 or more Corp/LLC to divide up your different investing strategies/assets from the get go?

Thanks for all you advice!


#3

Re: About to incorporate, have questions. - Posted by JHyre in Ohio

Posted by JHyre in Ohio on December 30, 1998 at 10:28:02:

Corporations are taxed once and the shareholders are taxed again, whereas LLC’s are mot taxed so the members are effectively taxed once. Dividends from Corps are not taxed for payroll taxes, while income from an LLC mat be subject to payroll taxes. As a general rule passive investments are not subject to patroll taxes. Passive activity conducted through an LLC is therefore taxed once, while such activity in corporation is taxed two times (corporate tax, income tax). Single taxation, lack of payroll tax and the lack of “dealer” issues is why Bronchick generally recommends LLC’s for passive/investment activities.


#4

Re: About to incorporate, have questions. - Posted by Diamond

Posted by Diamond on December 31, 1998 at 11:39:19:

This is good information, however I am incorporated as an “S” corp that is not taxed twice but have the same protection as a “C” corp. How does this come into play with the different types of deals.