Question for Frank Chin/Other's w/Corp - Posted by Linda-NY

Posted by Frank Chin on June 16, 2005 at 07:42:07:


My property management firm is set up as a “C Corp”. I have another business under a separate “S Corp”, plus another under an LLC currently taxed as a partnership.

The “C Corp” charges a fixed fee rather than a percentage of rent so that I can more easily managed its earnings. I figure out what benefits the “C Corp” is to cover for the year, and then work my ay back to figure out how much it should charge to have “no earnings”, or slightly negative, so as to avoid Federal Income taxation. Losses can be carried over, and if it accumulates, I can adjust fees in future years to have earnings and use up the NOL.

I organized the “C Corp” because I’ve been advised:

-Owners of “S Corps” are expected to draw a salary, on which they’ll have to pay SE taxes. I rather leave rent earnings as passive income not subject to SE taxes.
-Originally, not all health benefits can be deducted on one’s individual tax returns, though the law now allows 100%. But, I also have the “C Corp” cover copays, dental, etc, which is fully deducted, and I believe you’ll have to declare as income under the “S Corp” scenario.
-My health insurance broker advised me to establish a “Corporate Health Plan”, which normally has better health benefits as compared to an “individual health plan”
-Rather than workmen’s comp, get disabilty insurance. But the trick here is pay the premiums indivdually, rather than thru the “C Corp”. If paid thru the “C Corp”, benefits are taxed when you collect it, but its tax free if you paid the premiums individually.

Frank Chin

Question for Frank Chin/Other’s w/Corp - Posted by Linda-NY

Posted by Linda-NY on June 14, 2005 at 18:15:29:

Frank, last year you posted a response to someone stating that you have a corporation that you use for property management. Is it set up as an S or C Corp? I have a C Corp now and have been using it for property management for some rentals we have. My CPA today told me that I should change it to an S Corp and get Worker’s Comp insurance. I’m just wondering how you and other’s run your property management corporations. Do you fund your corp from your rentals by charging a percentage of the rent? Do you draw a salary out of your corp?

Thanks for any help and advice!