S-Corp or llc for flip? - Posted by Kelly

Posted by Margaret on July 22, 2005 at 12:48:38:

Yes you do! You will file a schedule ‘c’ or ‘e’

S-Corp or llc for flip? - Posted by Kelly

Posted by Kelly on July 22, 2005 at 01:37:25:

Which one is best for doing flips? anyone know the advantages and disadvantages for each?

Re: S-Corp or llc for flip? - Posted by Natalie-VA

Posted by Natalie-VA on July 24, 2005 at 14:55:24:


We use an S-corp for our rehab/flips. We pay self employment tax on our salaries, but not on the remaining profits.

We also contribute the max to our 401(k) plans each year AND the corp contributes 25% of our W2 income to profit sharing. Those two items right there will save you a huge amount of money in taxes.

We hold our rentals in a separate LLC.


Re: S-Corp or llc for flip? - Posted by Larry

Posted by Larry on July 22, 2005 at 15:16:04:

If you use a S-corp you will pay more for accounting expenses, but you do not pay social security tax. Depends on how many you flip to which one makes since.

Re: S-Corp or llc for flip? - Posted by Rich[FL]

Posted by Rich[FL] on July 22, 2005 at 11:31:49:

Flipping is a business; as such, you’ll be hit with self employment tax if you do it in your name or from within an LLC. Use an S or C corp. Research the archives in the legal forum for more info. It’s been discussed there several times.


Re: S-Corp or llc for flip? - Posted by John(Rome)

Posted by John(Rome) on July 22, 2005 at 09:12:42:

I asked a lawyer and was told Corp for flipping and LLC for holding. I can’t set up as S not being a US so I went for a C. I’m also setting up LLC’s for holding.

Re: S-Corp or llc for flip? - Posted by Ronnie (Tx)

Posted by Ronnie (Tx) on July 22, 2005 at 08:41:53:

I don’t know what the rules are in your state, but I would assume they
are the same for business entities across the board.

There is an atrticle oin the How-To section that talks about this. I
believe it is by David Finkle. He recommends LLC. I don’t believe the
specific problems that Randy had with the S Corp are accurate, though.
S Corp is not double taxed. It does carry a higher burden when
transfering wealth. It also has ceiling of 500,000 profit in a year. I don’t
know how high your are aiming, but I like to think big. (Of course we
always make the effort to realize as little income as possible to avoid
capitol gains.)

There are also more specific guidelines for who and what can be
considered for S-Corp status because it is not double taxed.

But an LLC doesn’t carry any of these disadvantages, and are easier to
set up. I just read another detailing the advantages of having multiple
LLCs for holding your different types of properties for the purpose of
shielding your business from lawsuits.

I agree with Randy. LLC is the way to go.


Re: S-Corp or llc for flip? - Posted by Randy (SD)

Posted by Randy (SD) on July 22, 2005 at 08:18:00:

The consensus of opinion is an LLC is a better choice, easier to set up and maintain, single member or two member LLC’s are common while corporations typically require a minimum of 3 officers to operate, double taxation in corporations vs. LLC’s which are a pass-through entity, LLC’s are not required to file quarterly reports etc. etc. etc. check out my corporation.com for more info. LLC is for short-term holding or flip, corporations for long-term (personally I don’t see any advantage for having an S-Corp, LLC’s are relatively new vs. corporations which have been around for decades) LLC’s were created to simplify the whole process of operating a business.

Risk an audit to pay NO SS taxes - Posted by JT-IN

Posted by JT-IN on July 23, 2005 at 16:54:48:


Your are on to the benefit of an S-Corp, in that profits taken as a dividend are NOT subject to Self Employemnt tax… However, it is risky to take ALL profits as a Dividend, and thereby avoid paying FICA. To be in perfect compiance, one should evaluate what you would need to pay a 3rd party, to do the elements of your position with the Corp, that relates to property management, etc. You should then pay yourself a commensurate salary, and hence, the FICA on that salary amount.

As an example, lets say that you determine that salary amount to be $ 30,000… so you should then take the 30K as salary, and pay 15.3% of FICA, matching and Medicare tax. Any profits over that amount can then be taken as a Dividend, thereby avoiding the 15.3% on the dividends drawn, legally.

Yes, there is a distinct tax benefit in using an S-Corp for the right situation, but to attempt to avoid all FICA is a lightning rod for an audit… and will surely end up in a problem at the first sign of an audit…

Just the way that I view things…


Re: S-Corp or llc for flip? - Posted by Jake

Posted by Jake on July 22, 2005 at 12:15:51:

I do not believe that you have to pay self employment tax if you use an llc.