When does it make sense to incorporate? - Posted by Rob (IN)

Posted by ken in sc on February 13, 2002 at 07:26:23:

If you only have rental properties, rther than buying to immediately sell, then you don’t need a corporation. In fact it would be a detriment in that you do not want to build a large net worth in a corp. It would be hard later in life to get that money out without double taxation.

From all that I have learned - I am no lawyer or CPA - the basic premise is rentals (investments) are held personally or in an LLC, and when you buy to sell (a business, not and investment), then you want a corp. So when you get into the business of flipping, you would incorporate then and buy those properties in the corp name. This way the IRS can tell what properties are investments and thus can be depreciated and exchanged, and what properties are “dealer” and thus cannot.


When does it make sense to incorporate? - Posted by Rob (IN)

Posted by Rob (IN) on February 12, 2002 at 13:36:43:

When does it make sense to incorporate?

Should it be performed when a certain amount of income is realized from REI?
The reason I am asking is my CPA said NOT to incorporate, that I would realize more tax advantages by not having a corporation.
My situation currently is 2 rental properties, combined monthly incomes of $1300 and a full time job.
I plan on investing in more this year, and possibly flipping some houses too.
Please respond with both pros and cons to the incorporation issue.


Re: When does it make sense to incorporate? - Posted by Rich (WA)

Posted by Rich (WA) on February 14, 2002 at 05:07:10:

The only reason you would want to incorporate is for the tax rules and the liability protection. I doubt that you are making enough money to justify incorporating (like your CPA said).

I’m not a CPA or Lawyer but I would go under an LLC for liability protection (to separate your investments from your “personal life”) The proffits flow though to your personal tax return as does the losses and breaks (depreciation, etc.)

Your CPA will be the best one to tell you when to incorporate. Talk to him about LLC’s and how they work. :slight_smile: