Commission in "LLC and Corp" Situation - Posted by Roxanne

Posted by jom on October 22, 2001 at 23:55:38:

>>>Let me ask you this, do you think you can find
>>>$800+ deductions which is not allowed as a landlord
>>>but allowed in LLC?

As far as the deductions are concerned, I don’t know. I’m still in the process of researching this. It just seems to me if you have $200000 worth of properties and you can get a positive cash flow greater than, say, $10,000 out of it (is that possible?) then you can look at the $800 as an 8% state tax.

As far as liability, what is wrong with one of those “umbrella” policies? Won’t that cover most of what you need?

Thanks for your response. I’m new at this so I’m just asking questions… :

Commission in “LLC and Corp” Situation - Posted by Roxanne

Posted by Roxanne on October 22, 2001 at 17:24:15:

I just passed CA real estate broker’s license exam and lately I also set up one LLC and one S corp for real estate investing. I will use the S corp (I am the designated broker of the corporation) to practice real estate business.

My questions are:

  1. If I buy rentals, I plan to have the LLC hold the title. However, since the LLC just started, I can’t borrow money on it. Therefore, my husband and I will have to be on the loan. In this case, do I just tell the title company/seller to deed the title to the LLC while we are on the loan? Will lender lend us money in this case?

  2. If I decide to sell the rental within 2 years, should I transfer the title from LLC to S corp?

  3. Since I am a broker, I can earn commission on all the properties I purchase/sell. I am thinking to top off the commission from the sales price. However, I am not sure how to do it, considering the LLC and S corp are involved. What should I put on the sales contract?

Any response is appreciated. Thanks


Re: Commission in - Posted by jom

Posted by jom on October 22, 2001 at 19:50:56:

I’m curious…how many properties do you plan on placing in the LLC? The reason I ask is that it seems you have to place a lot of rental properties in an LLC in CA for it to pay off considering the franchise fee in CA of $800. I was thinking of using an LLC for rentals and having no more than, say, three rental per LLC but this fee is a killer! I hate CA. lol




Commission in “LLC and Corp” Situation - Posted by David Krulac

Posted by David Krulac on October 22, 2001 at 18:03:19:


these are my personal opinions only:

  1. The bank will probably want personal guarantees in any event, whether the property is in your personal name or corp or LLC.

2.I wouldn’t bother, but that’s me. We had a big discussion here recently about dealer status. Keeping as a rental, holding for longer than 2 years, and holding in an entity that is strictly rental/longterm/non-dealer/non-flip will certainly help your case.

  1. this is a little sticky. if the commission income is joint income anyway, and you file jointly, and all the members of the LLC and S-corp are you and your husband, then your probably ok. I presume that that when you say “all the property I purchase/sell” that you literally mean property that you own and sell or buy yourself and own and are not taking about property owned by clients/customers?

Lets say that you sell a property that you own in your LLC. As the broker of record you can say that the commission is zero, therefore increasing the proceeds to the seller (also you through the LLC) by whatever the commission would be.

David Krulac

Re: Commission in - Posted by Roxanne

Posted by Roxanne on October 22, 2001 at 22:48:16:

Thanks for your comment.

I think it’s not “how many” properties you put under the LLC but “how much” of the properties you want to put under the LLC.

I am a small fish and I am comfortable with $200,000 worth of properties being put for each LLC, even though I was advised by my attorney to put no more than 2 properties in one LLC to reduce risk. What’s funny is - my CPA said no need to establish LLC because it’s not worth it, just like what you said that you can hardly break even. However, my attorney said it’s definitely a necessity, if you don’t want to lose everything overnight by a lawsuit. I think it really depends on what you want.

As for me, since I am a licensed, I make money when I purchase and also when I sell. Or you can say I make money by not paying half of the commission which I should have paid.

Let me ask you this, do you think you can find $800+ deductions which is not allowed as a landlord but allowed in LLC? But the bottom line is the liability issue, I think, when you consider LLC or any form of entities to hold properties.