I need help incorporating an existing business?
My business includes flipping and renting homes. I think I need an S corporation. I have searched online but I need some help figuring out next steps.
Hello, you can contact info@ilbfinance or www.ilbfinancial.com for more information on incorporating your business.
Rocket Lawyer is an excellent resource for any business owner to utilize. There is a lot to learn about the differences when it comes to incorporating your business. How do you want to structure it? Do you have any partners? Do you plan on selling stock to raise capital? Those are just a few questions you need to ask yourself. Key note for real estate as an S corp:
"Passive income limitation: You can't have more than 25 percent of gross receipts from passive activities, such as real estate investment." However, you may form an LLC and have it treated as an S corp for taxes. " - source https://www.inc.com/guides/201103/s-corp-vs-llc.html
"How Is a Limited Liability Company Taxed?
For tax purposes, by default, an LLC with one member is disregarded as an entity. Or, in other words, is treated as a sole proprietorship. By default, LLCs with more than one member are treated as partnerships and taxed under Subchapter K of the Internal Revenue Code.
However, an LLC can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. If so, the LLC will be taxed under Subchapter C of the Code. And, once it has elected to be taxed as a corporation, an LLC can file a Form 2553, Election by a Small Business Corporation, to elect tax treatment as an S corporation."
- source https://www.bizfilings.com/toolkit/research-topics/managing-your-taxes/federal-taxes/llc-electing-s-corp-statusthe-best-of-both-worlds#:~:text=By%20default%2C%20LLCs%20with%20more,of%20the%20Internal%20Revenue%20Code.&text=And%2C%20once%20it%20has%20elected,treatment%20as%20an%20S%20corporation.
Full disclosure. I'm not a lawyer or an accountant and I'm not being paid by the sources I used for reference. This is just some of the things I learned when going through the same process when forming my LLC. I'll also say that it is less expensive and takes much less paperwork to form an LLC. But as always, just as if you were putting together a Real Estate deal, Practice Due Diligence and get some legal advice on what would be the best fit for your situation! Good luck my friend. #iFixNiFlip