S-Corp or LLC

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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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Rainer
2,280
Wayne Pehrson
Sandia Peak Realty - Albuquerque, NM
Realtor, Albuquerque NM

Dominic,

I recommend 2 steps.

First, find out what your long term goals are. Where do you want your business to be in 5 or 10 years.

Second step, talk to an accountant.

Each one has advantages. Click here to see a brief comparison.

Jul 12, 2007 03:37 PM #1
Ambassador
576,149
Frank Rubi
Frank Rubi Real Estate, LLC. - Metairie, LA
Homes for Sale Kenner - Metairie, La.

My recommendations is to see your attorney and CPA. These are your team players, they know best. I believe in my CPA more than my attorney. Good Luck.

Jul 12, 2007 04:11 PM #2
Ambassador
897,632
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Realtor - Ann Arbor Real Estate
I work with a CPA that analyzed my tax returns. He recommended a C Corp. Get a CPA that works specifically for realtors in you community. He will evaluate your tax returns and make a recommendation. Warning.........not all CPA's are alike, so make sure you find one that knows RE.
Jul 12, 2007 07:07 PM #3
Rainer
52,384
Jennifer Steck
Rocky Mountain Homescapes, Keller Williams, Denver Colorado - Denver, CO
Denver Real Estate
I agree. My CPA is one of my best advisors. Not only does she know her stuff, but she can explain it to me so I get it. That is true talent.
Jul 12, 2007 07:13 PM #4
Rainer
144,679
Robert Whitelaw
Whitelaw & Sons Real Estate Services - Morgan Hill, CA
Broker, CEO, Realtor , ePro
If your trying to decide between an LLC and an S Corp, the state has answered the question for you, a real estate brokerage cannot organize as an LLC. If your just looking to protect your personal assets and your not planning on creating a brokerage under this entity, the LLC option is still open to you. I agree with the other posters about getting professional advice. 
Jul 25, 2007 10:02 AM #5
Rainmaker
278,137
Dom Naidoo
Westside Properties - Venice, CA
Malibu to the Marina Real Estate

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!

Aug 10, 2007 12:34 PM #6
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.

Sep 11, 2007 08:53 AM #7
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.

Sep 11, 2007 12:13 PM #8
Anonymous
John Kobeck

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

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

Sep 26, 2007 06:07 PM #9
Rainmaker
278,137
Dom Naidoo
Westside Properties - Venice, CA
Malibu to the Marina Real Estate
John, thank you for the helpful link! I look forward to checking it out. All the best!
Sep 27, 2007 12:25 PM #10
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Rainmaker
278,137

Dom Naidoo

Malibu to the Marina Real Estate
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