If your property management company is a sole proprietorship, then you should file the income & expenses associated w/ it on Sch C. I know Bill Bronchik doesn’t like Sch Cs, but I love them, to a point. True, the likelihood of an audit is greater, but if you’re doing what you’re supposed to be doing anyway (documenting all of your business deductions) then there is nothing to fear. Small little mom & pop sole proprietors can do things (i.e. shifting of income to lower income family members) w/ less expense than setting up a full blown C-corp. Like I said though, to a point. Once the income becomes large enough, then creating a corporation is the appropriate course of action.
Bill,
In an earlier post you advised against using the schedule C. I believe your advice was to set up a corporation. Well, last year I ran my property managment company as a sole proprietorship. How should I file my taxes for the sole proprietorship? Seeing as how the IRS targets “sole proprietors” or “Schedule C” filers for auditing.
The main reason I set up the business was to keep the tenants from writing their rent checks to me, but instead to my company. Also so I could write off the various and sundry expenses. I’ll be setting up the corporation this year. But what advice can you give me for 1999.
I would also point out that just because filers of Schedule C may get audited more frequently doesn’t mean that you should avoid using it if you have Schedule C activity. Your return needs to be filed correctly, despite whether it forces you to use a form that you may not prefer to use.