Multiple investors in a Corp.? - Posted by Michael Morrongiello

Posted by Alisa on July 09, 2002 at 13:04:30:

I have a similar question, but regarding a property that a group of 5 investors are going to buy and hold for a rental for at least 5 years…How about an LLC taxed as a partnership? One of the partners will manage the property for a fee. Would all of the partners then receive a K-1 at the end of the year? Or is it better to be taxed as a corporation?

Multiple investors in a Corp.? - Posted by Michael Morrongiello

Posted by Michael Morrongiello on July 08, 2002 at 19:00:33:

Are you aware of any restrictions on forming a corporation for flipping fixers type properties that multiple people invest in as shareholders? I had heard that if
you have multiple investors as a non-corporation for a deal, that’s a no-no. But what about having mulitple investors involved in a corp that will be buying, fixing, and reselling properties?

Warm regards,
Michael Morrongiello

Re: Multiple investors in a Corp.? - Posted by JHyre in Ohio

Posted by JHyre in Ohio on July 09, 2002 at 08:21:08:

Using a closely held C-corp to hold properties is a no-no, because there is automatic double taxation at the highest possible rates (“personal holding company tax”). No similar levy applies for flips. The only tax issue that comes to mind, assuming that a corporation is appropriate for the investors tax circumstances, is that subsequent contributions of capital by investors is less flexible than with an LLC…generally, selling shares to investors is preferable to straight contributions of capital if contributions are to be non-pro rata, or not made by all of the shareholders. Also, I would consider forming an LLC and checking the box to be treated as a corporation…you are a corp for tax purposes, but an LLC with charging order protection (varies by state) for non-tax purposes.

John Hyre