S-Corp or LLC

By
Real Estate Agent with Westside Properties

I need some helpful advice please. Now that I have closed a handful of deals this year and am looking at having my best year in real estate, it's time to make some serious decisions....I have been told by my associates that forming an "S-Corporation" is much better than a LLC(limited liability corporation).

Honestly, I do not have the slightest clue as to the differences between the two. And, I am not too sure about the "pros and cons" either.

I also wanted to get some ideas as to what Realtors claim as deductions. Any helpful comments, tips and suggestions would be GREATLY appreciated!! Thank you.confused

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Tags:
burbank real estate
education
helpful tips
malibu real estate
southern california real estate
westside

Comments 10 New Comment

Rainmaker
278,087
Dom Naidoo
Malibu to the Marina Real Estate
Westside Properties

John,

I'm in process of creating an S-Corp, per the suggestion of my accountant. It seems to have more positives and less negatives than an LLC. Thanks for your interest!

August 10, 2007 12:34 PM
Anonymous #7
Anonymous
Pete

Hi, I am an accountant, and I just came across this blog while doing some tax research for a client.  I wanted to shed some light on this for all of you.  The key thing to remember is that an LLC is not a recognized entity for tax purposes.  An LLC can be taxed as a Schedule C sole proprietor, a Schedule E rental property, a 1065 partnership, an 1120 C-Corporation, or an 1120S S-Corporation.  The default taxation of LLC's is Schedule C or Schedule E if you are a single member LLC or a 1065 partnership return if you are forming an LLC with more than one person.

When you set up the LLC you can use IRS Form 8832 to elect to be taxed as a C-Corporation or S-Corporation, so what this means is that an S-Corp and an LLC can be taxed exactly the same way if you make the election for your LLC to be taxed as an S-Corp.

S-Corp taxation generally has the most favorable tax advantages for anyone making any money, but there are also stricter reporting requirements, and you will want to pay yourself a salary out of the business to avoid any IRS entanglements.

I know this can all be quite confusing, but I hope this cleared up a few things.

September 11, 2007 08:53 AM
Anonymous #8
Anonymous
Anonymous

Pete,

THANK YOU very much for your extremely help information!!!! I am glad I decided to form the S-Corp. It's amazing that I paid my accountant for an hour explanation of what you just said in about a hundred words!!! Thanks again Pete.

September 11, 2007 12:13 PM
Anonymous #9
Anonymous
John Kobeck

Wow I found a very usefull article here about C and S corps

http://www.taxguru.org/corps/scorp.htm

September 26, 2007 06:07 PM
Rainmaker
278,087
Dom Naidoo
Malibu to the Marina Real Estate
Westside Properties
John, thank you for the helpful link! I look forward to checking it out. All the best!
September 27, 2007 12:25 PM
Rainmaker
278,087

Dom Naidoo

Malibu to the Marina Real Estate
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