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CPA here. I own my 3 houses in my single-member LLC which I own 100% of. I do not elect any C-corp or S-corp status on the LLC for tax purposes. S-corp or C-corp is very bad for rental real estate. The level of insurance you purchase for each house matters a lot more for liability protection than the differences between LLC/Corp.
The thing I would like to hear about is what and how to layer in then use of trusts , both living and irrevocable. I know we all feel like we will live forever, things happen. Especially if invested in CA properties on the passive side, things like step-up at member death (eg umbrella llc with partner members can introduce all sorts of issues). Additonally: minimum annual tax liabilities, property tax basis considerations (especially when where partners are used) have considerable considerations to work through when building in estate planning considerations. Would hate to see those assets go though probate and get hit with inheritance tax, and potentially even loose cost basis step-ups because things were not done right. Example question: who actually is the member of the holding company? You and your wife, or your trust. If your trust, does is still protect your corporate vail, or does it get compromised because it is potentially just a single member (a big reason for a partner is to help shore up the vail). What and how do you set up a irrevocable half upon the death of a spouse or do you? The point being, estate planning and even the use of irrevocable trusts while alive as part of that estate plan or income plan is a super critical part of a healthy corporate structure for these types of businesses, especially on the passive side.
Question: you mention only filing 1 tax return with the passive income structure of a holding LLC. That has been my goal but not a reality with my CPA. Do you avoid creating EIN numbers for the baby LLC's and only register an EIN with the big holding LLC? And if so, when you get a mortgage loan on a property in a baby LLC, who is the loan to? wouldn't most lenders require lending to the baby LLC because it holds the property, and therefore it needs an EIN and needs to file a return?
Some people suggest that for active income it is better to have C-Corp as you save more on taxes which allows you to spin more money and grow it faster. Sure later you will get double taxed, but still. There are 2 books on this from Clint Coons
I say they (WE!) should stop double taxation - taxation on both the income AND the expense side -, and have perhaps a single tax on the expense side, say VAT on everything purchased, no matter if it's purchased by a private entity or a corporation, but at the same time have no income tax and no corporate tax. Just imagine how much time and expense would be relieved from EVERYONE, including the states and the IRS and the police etc. etc. etc. So many people could start doing productive work: IRS employees and accountants would probably be great at any sort of research, maybe even at areas of engineering. And there would be no need to monitor people and corporations to see if they are paying the 'proper' taxes; no need to investigate them, no need to reinforce ultra complex tax laws, to sue, to jail, to squeeze... How much better world would it be!
I have a great CPA and a great bookkeeper. They are able to bring my taxable income way way way down so I paid very little in taxes. However, then I cannot qualify for Loans, what do I do to qualify for Loans if I’m not paying anything in taxes?
check Clint Coons books. But generally you cannot have cake and eat it. If you are showing to IRS that you don't make money, you cannot expect lenders to give you money, right?
17:30 Why would you have more than 1 S Corp? If your S Corp is your main operations company then ALL of your different operations LLCs should flow into your 1 S Corp. Having more than 1 S Corp is like having more than 1 Holdings LLC or more than 1 Living Trust. What's the point?
I'm assuming on the active side with the scorp you're able to setup a solo 401k. Do you know if you could setup a solo 401k on the passive/holding llc?
Question- How many times can a property re enter the foreclosure / sheriff sale auction listings? (Watched a home 3 yrs now on/off right before auction time) Why does a property enter the foreclosure auction list and then be removed before auction?
If its a property you intended to "flip" and not intended as a "rental" or long term hold, then its active income and not capital gains. The key, is the intent.
as far as I know, no tax benefits of having entity structure for passive. Only liability, because in the eyes of IRS, there isn't any entities if they are all disregarded, so everything is in your own 1040. There might be something about having it taxed not as disregarded in order for lenders to count 100% of rental income when it comes from W2 or K1 instead of rental income which they would use 70-80%.
Learn to use the apostrophe. You don't just add an apostrophe every time you put S on the end of a word. Every apostrophe you put on that whiteboard is a typo. Amateur hour.
