Why S-Corporations Are A Horrible Idea For Owning Rental Real Estate 

They have a couple one time fees depending and service and a very low retainer. Consider calling them. Worth it.

@@StreamingF1ydave calling what?

Anderson Associates

That is awesome!

If the bank requires you to deed the property out and it is picked up on an audit - you could have a taxable event.

Yes. The S-corp will be the sole beneficiary of the land trust.

It is my understanding you only need to set up an LLC to avoid the withholding.

I really appreciate you taking the moment to reply to my question. Your videos are very informative and helpful. Thanks

Glad to help!

You are welcome.

I would use it for running an active business I.e., real estate broker.

Glad it helped

It could come up but I would just take distributions until such time as the IRS comes knocking. I am not aware of too many real estate S-Corps that pay salary.

correct. If you are in that situation consider moving it into a disregarded LLC owned by your corporation but that may not work if the broker asks for tax returns.

What if the S-Corp creates a Land Trust with itself as the Beneficiary. After the Trust has been created, do an Assignment of Beneficiary to the individual. Once that's done, the individual can get a loan on the property. Would that work?

@@terrycrawford6740 Probably not if the lender asks for tax returns to verify the income.

I'm referring to a case where the individual has enough personal income to get the loan approved. Would my strategy work?

So what kind of a set up should one use besides an s corp

You could but why use an S-Corp tax status and not partnership.

Thank you very much!

Not if the S-corp is the sole member of the LLC.

@@ClintCoons oh I see..thanks for this information. Very helpful video.

Both are great. We use them interchangeably.

Yes it would. You should set up the LLC as a partnership or disregarded for the flow through tax status.

Both. One to hold the property and another to manage it. However, your tax status is important in deciding on the proper structure so it's best to have a consult. If you would like a FREE 30-minute consultation, you can request one here - aba.link/30minSession

No you do not want to use a C-corp. This will have a potentially worse tax result. I prefer to use partnerships and disregarded entities.

@@ClintCoons could you elaborate on this, which one should you use partnerships or disregarded entity

@@quanticowoodard3946 It depends on your situation. I suggest you set up a strategy session with my firm so we can assess your situation.

Not recommended. The C-Corp will block your flow through depreciation and if you pull the the property out it will be taxed twice.

If its in an S-Corp you may.

Yes provided your LLC is not taxed as a corporation.

No. The disregarded LLCs are separate companies. To have a series LLC you must create it along with cells.

Probably not if it did not hit your S-Corp's tax return. If it hit the return then you might have an issue if the value has increased unless you deed it back after the refi.

Sorry but no easy answer to this one. You really need to work with a CPA because tax basis I really important in the planning.

Victoria email me your contact information to ccoons@andersonadvisors.com and I will have someone reach out.

LLC is the preferred choice with a disregarded or partnership tax election

@@ClintCoons my accountant told me that because our w2 income is already high, we won't be able to claim deductions for purchasing and furnishing and operating the rental property. But if we open a s-corp, we are allowed to have deductions. Is this true.

@@sumayahzn I'm not sure how the S-Corp will change anything for you.

No difference.

Management, flips, brokerage, agents, - it really comes down to the situation that is why I tell people it is not a one size fits all approach.

Any business expense is deductible. I have my rentals in LLCs which are owned by a Wyoming LLC for anonymity. Wyoming is one of the very few states that offer anonymity and charging orders. It’s a good structure. It’s like an iron vault and creditors can never break through it. In fact they will probably just give up if they see this structure. Insurance alone may not cover everything.

Insurance has a cap on how much protection your guaranteed. Anything beyond that will come out of your pocket and assets

Actually there is an exclusion in Tennessee Clint talks about in other videos. I don't recall it was LLC or using a land bank trust. I'm pretty sure they said it's an LLC fee exclusion for holding real estate specifically. Additionally, you are on the right path. Using insurance is the beginners way with bad advice. Check out more of their videos. They explain why you don't want to rely on insurance. For example, a tenant blows the property up cooking meth or even they kill someone or people from the event. You are now liable for wrongful death in the millions because even though he disabled the smoke detectors, you can't prove he did it. The court will assume you are at fault. Insurance isn't going to cover you since fire Marshall said your smoke detectors didn't work, etc. This is paraphrasing a real example. This is why you want an LLC. To limit your liability.

I do recall something about them being able to save someone a lot of money regarding Tennessee llc's because someone's CPA wasnt aware of the exclusion.

I looked it up, it's called a FONCE exemption. Family owned, non-corporate entity.

If the LLC is held by an S-Corporation then it is probably disregarded.

@@ClintCoons Was this posted?

@@roflofl Was what posted?

LLC is preferable.

@@ClintCoons llc set up which way please, I am currently in the process of having an attorney set up one for me now, using an s corp but it is not done, which structure should be used?? Disregarded entity? Or?

@@quanticowoodard3946 It really depends on the LLC's purpose, your tax bracket, and who are the owners to list a few of the considerations.

It can be owned by an LLC that is treated as a disregarded entity for federal tax purposes.

@@ClintCoons so how would you pay yourself a salary through your S-Corp if your let's say "New Jersey" S-Corp is owned by your Wyoming LLC?

@@lilharv7376 You set yourself up on payroll through the S-Corp.

@@ClintCoons So I could set up my New Jersey LLC taxed as a S-Corp as Member Managed with the only single member being my Disregarded Manager Managed Wyoming LLC & still set myself up on payroll in New Jersey through my S-Corp? or would I have to at least make the S-Corp in New Jersey as Manager Managed with me being the manager and the Wyoming LLC still the only single member?

@@lilharv7376 What are you planning to operate through the S-Corp? This level of detail - really should set up a strategy session. See the show notes for a link.

It all depends on the strategy.

That’s a lot of years. I’m hunting for property now. Can I ask how did you do that? 19years collecting rent tax free??? That’s amazing.

I would set up an LLC and not sell the property to an S-Corp.

Oscar it depends on your business. Remember planning is not a one size fits all. Every situation needs to be evaluated.

Thanks