Advantages of a C Corp vs. an S Corp... - Posted by Ed (NY)

Posted by Frank Chin on August 26, 2003 at 16:40:09:

Hi Matt:

I file as a partnership for the LLC, thus the 1065. If you’re a single member LLC, then you’re a schedule C filer by default.

You can even elect to file as a “S Corp” for an LLC.

Suggest you use a CPA for the very first return - then use Turbo Tax thereafter.

Frank Chin

Advantages of a C Corp vs. an S Corp… - Posted by Ed (NY)

Posted by Ed (NY) on August 26, 2003 at 09:32:47:

I’m relatively new to RE investing (I don’t own any properties as of yet), and I’m looking into wholesaling and flipping properties.

I’m looking to incorporate, and it seems like many inverstors who incorporate for the purpose of flipping properties do so in the form of a C Corporation.

I’m an accountant, and I can’t see the benefits of forming a C Corp. as opposed to an S Corp. for individuals. I know that an S Corp, shareholders cannot deduct shareholder med. benefits, and if you re-invest the profits (i.e. not take any distributions), you can aviod double taxation. In addition, in most situations C Corp tax rates are less than that of individuals.

In my mind, these benefits can’t offset double taxation that occurs when you do take profits, and I would like to here other points of view on the matter. Thanks!

Re: Advantages of a C Corp vs. an S Corp… - Posted by Frank Chin

Posted by Frank Chin on August 26, 2003 at 10:21:34:

Hi Ed:

I’m not a CPA, but I have an LLC, C Corp, and S Corp.

As for me, the C Corp services as a management company for my RE activities, plus provide office services for the LLC. The C Corp bills the other entities for services performed.

At the beginning of the tax year, a projection is made of benefits (medical, co-pay etc.), compensation for the upcoming year, and the the appropriate intercompany billing scheme is devised. Purpose?? Revenues will roughly equal expenses by year end, thus no income. Ergo, no double taxation for the C Corp.

Thus, this sliver of income will enjoy the benfits of the C Corp. The balance of the P&L stays within the S Corp, and LLC etc, and taxed accordingly.

With Quickbooks, and its memorized transaction feature, the intercompany billings are handled quite automatically. I make a monthly deposit into the C Corp when I deposit the rent checks.

Yes, I have to do another set of tax returns at year end, which takes me about two or so hours with Turbo tax, with the data exported from Quickbooks. CPA’s around here in NYC charge $700.00 minimum for each Corp entity, and Turbo Tax saves me a bundle. I also tried out “Tax Cut” put out by H&R Block.

To cover myself, I wrote an agreement between the entities as to what the billing is, and the work to be performed. For instance, for REI activities, the C Corp charges a fee equal to 10% of the rent roll.

If I have unexpected expenses, the C Corp will perform some additonal work, and invoice according to the agreement.

Frank Chin

Turbotax does LLC sFrank? - Posted by mattc

Posted by mattc on August 26, 2003 at 14:32:54:

TurboTax will do LLC filings, Frank?
I had wondered about that (first year for LLC
this year)


Frank Chin–corporate tycoon. - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on August 26, 2003 at 12:02:37:

Frank Chin–(NY)---------

I liked your post.

So, now we see how you are real estate and corporate tycoon.

Good InvestingRon Starr*****

great info thx Frank Chin! nt - Posted by Mark

Posted by Mark on August 26, 2003 at 10:30:23:


That’s “Turbo Tax for Business” - Posted by Frank Chin

Posted by Frank Chin on August 26, 2003 at 15:51:21:


Turbo Tax for business does the 1065, 1120, and 1120S returns.

I file the 1065 for the LLC.

Frank Chin

Thanks, Ron - Posted by Frank Chin

Posted by Frank Chin on August 27, 2003 at 09:21:24:

Hi Ron:

I enjoy many of your posts as well.

With the availability of cheap but powerful software like Quickbooks and Turbo Tax, most of us can do what tycoons used to do, with their platoons of lawyers and accountants.

I refined my ideas after some discussion on this board some two years back with John Hyre when there was a lively discussion about using “C Corps” vs “S Corps”.

Frank Chin

Re: That’s “Turbo Tax for Business” - Posted by mattc

Posted by mattc on August 26, 2003 at 15:55:20:

Great, thanks. I will plan on buying
that around tax time - so will save your info.