Posted by Chris in AL on February 22, 2002 at 24:32:39:
About 2 years ago, I set up an S-Corp (Badger Homes, Inc.)for Lonnie deals, and it has kind of evolved into a intersting mix of ‘realtor’ type of marketing/sales and MH dealership. Profits are coming in pretty quickly with all cash buyers everywhere (college town = buyers w/ good credit) during the spring & summer season. I chose an S-corp to separate my “IRS Dealer status” MH sales from my 1 rental condo, and my other future rental properties.
The next step in the plan is to start an LLC to hold and manage my rentals. It has been recommended to me that I set up the LLC UNDER the MH corp, basically that would involve setting up the managing member of the LLC as Badger Homes, Inc.
Please give me feedback on the following assumptions:
- The S-corp would provide an added layer of protection.
- Setting the LLC up as a subsidiary of Badger Homes would lead to more borrowing power than if it was independent, and borowing power was based on my personal salary. (is that right?) The MH biz turns over a lot more $$$ than my salary ever would.
- REI (buy & hold) properties in LLC MIGHT be classified as dealer property, losing great REI tax benefits.
- One bad legal problem with the rental real estate could also take down the totally unrelated MH business.
Any advice? I’m trying to convert the money from the really lucrative MH deals into down payments on very solid rental properties ASAP. (minding my own business - thanks R.K.) I don’t want to wait 2 more years for more business tax returns for the REI LLC before I can borrow some more money. I am tired of trying to wait it out on a shoestring budget. I would like to make sure I set up the REI LLC correctly from the beginning, considering all these factors.
Any advice would be very helpful.
Chris in Alabama