Posted by Bill (OH) on March 22, 2000 at 08:47:09:
That’s almost word for word what my CPA said! (grin). The reason for an ‘S’ corp for ‘churn and burn’ deals is that you can divy up the income between salary and dividends. The down side is you have to set up that payroll system and keep up with it or you’ll find the IRS will assess you a penalty. Also, another reason is that with an ‘S’ corp you can’t lose more than you’ve put in. That’s a real problem with rehabbed rentals that you want to deduct costs on all the way past zero to carry over to the next year. So, LLC for those long term projects, and ‘S’ corp. for short term ones. Good Luck!
I have been doing the CS course and coaching program since Dec 99. I found a 5 unit property that I will be purchasing if a few weeks. I need to know should I sent up a Limited Liability Corp or S corp or something? I want to make sure that if something would happen that they cannot take our personal property. Any input on this would be greatly appreciated. If I have to where do I get started to set something up? I need to keep costs down as much as possible.
Re: Should I set up a S corp or LLC - Posted by Bill Lange
Posted by Bill Lange on March 15, 2000 at 22:25:06:
Kevin,
Once you decide which type of entity to create, it is very easy. I created both a LLC and an S corp in Colorado by going to the Sec Of State of the state of Colorado website, downloaded the form, filled it out and mailed it in. It cost $50 plus a stamp. After about six weeks, I got notification back from the state. I faxed that notification form along with an IRS form to the IRS to get my Employer ID number. That part is free. Start at your state governments website and work your way down to the sec of states page. Do a little research and you’ll find what your looking for.
Check out Bronchick’s articles on this site. He has courses that cover this area available here. He runs the Legal Corner section which has a lot of good stuff. You can also check out additional material on protecting your a$$ets at his site www.legalwiz.com.
generally speaking. Seek your own legal advice, but “if your are going to hold them for a year or more, LLC, if you are going to churn an burn, S Corp.” I have an S Corp and will be setting up an LLC because it so easy. $50 and 1 sheet of paper.
Ask for help locally because every state is different.
Kevin, good question. Click on the “legal forum” in the upper left corner of the home page. Attorney Bill Bronchick answers questions just like these and has courses that show you how to set up these entities. I have used them and found them to be very good. The course and filings fees were less than I would have paid an online service to form my companies. Additionally this way I was able to keep the material and the education.
What company are you using to get financed for your 5 unit property?
I’m looking at an 8 unit and am trying to find financing.
please email me with the info
Thanks.
filing to set up a Corporation and LLC is basically as simple as described. Fill out a form a send it in with the filing fee.
Keep in mind that the courses that have been recommended also show you how to run these entities. Especially with Corporations, there are legal formalities that must be maintained in order to defend against a creditor trying to pierce the corporate veil. If these formalities are not kept in place, a judge may pierce the veil, declare this entity to be an alter ego and allow the creditor to go after your personal assets. This defeats the whole purpose of creating these entities.
I recommend Bronchick’s courses because they cost less than what most online filings services would charge. You get the education of doing it yourself plus Bronchick provides all the legal forms you need and the forms for documenting the meetings, operations plan etc. to maintain your corporate veil.