Super new to land investing ( haven’t gotten my first deal yet). I’m in the process of meeting with a CPA and deciding how to set up my entities. My biggest question, and maybe I’m over thinking it, is what entity do I use as the entity that advertises the properties once I’ve bought them? Basically, which LLC is the face of my company?
My plan is to follow the structure suggested by Clint Coons. I plan on starting a main LLC taxed as a corp and then having that corp own individual flow through LLCs that own the properties. Obviously I don’t want to start a new email/website etc. for each new property. So do I use the main LLC as my company that the public can see? Or do I essentially create a marketing LLC under the umbrella of the main LLC? Any help would be awesome. Thanks!
Many pros and cons and different opinions on this subject, but despite all that remember that this decision will have very limited impact on the profitability of your business, which should be the primary concern at first. Simple is better. When there’s more money, it warrants more complexity. You can ALWAYS re-organize and re-brand, we’re not Coca Cola or Nike, so there’s little cost to doing it. Make your admin as simple as possible (no way am I going to open up an LLC for each state nevermind each deal as I’ve heard some folks suggest, we’re not billion dollar enterprises with tax advisors that make $750k/year creating international LLCs as their jobs).
That said, you want to protect yourself legally and financially, and you want to put up a wall of personal protection as well (in a matter of months my personal details were found and posted online despite an LLC and a DBA that wasn’t obviously connected). So it’s simple: LLC in Wyoming or Delaware (they’re anonymous) and a DBA for your brand. You can start new DBAs anytime you want to invent a new brand.
Taxation and LLC are different concepts, one is IRS and the other is lawsuits. Until you’re making 50k+, don’t worry about an S-Corp to “pay yourself”, it’s simply an LLC to shield yourself legally and you pay taxes as an individual. Once you have significant cash flow, in that year you can then register and set up the S-Corp and start strategizing. And then again, until you’re making $250k or even more, spending time trying to strategize about taxes is very likely not a value add activity.
Set it up, and then start thinking about revenue generating activities 99.9% of the time. Trying to save taxes on money you haven’t made leaves you with $0.
@Geertsema thanks so much for the useful insight! I do want to keep it simple as I’m just in the proof of concept phase. My only reasoning for wanting the s-corp was because I heard that even after just one flip I could get tagged as a dealer and ultimately it would be better for the s-corp to get tagged instead of myself personally. I could be completely wrong.
Ok interesting. I’m not sure off the cuff what the difference would be between the S-Corp being a dealer vs. the individual.
The income you make from flipping land fits the criteria of being a dealer and the land is your inventory. It’s not about the amount of properties you flip, it’s about the intent of your flipping and your business. (If you buy & hold for appreciation, those properties are not inventory and upon sale years later would be considered under capital gains rates).
The money you make as a dealer is taxed the same as any other self employement income at ordinary income tax rates. I’m not aware that you can escape this.
Setting up an S-Corp is overly complicated and requiring for a small business when starting out. It’s not a tough breakeven to reach when it starts making sense, but it will cost you more in Bookkeeping and Tax prep than any benefits you may gain from it when starting out without certainty that you will break that threshold.
Worst case as far as I’m aware you can file for an S-Corp retroactively within the year, so you don’t need to make all these decision now. Get the deals, and then go pay a CPA to support your decisions based on your specifics.
There’s a lot of frustratingly terrible and confusing tik tok type advice out there by people who think they understand or are looking for followers by telling you to buy a G-Wagon. I am now flirting with being suspect too . So as mentioned in the last paragraph of the second link, always ask a CPA before filing if you’re unsure.
I literally just set up my llc in Nevada. I wish I had known this before about Wyoming. I was going to set up in Wyoming when someone wanted to triple charge me for setting it up, but thought I had to have a separate one for Nevada anyway since that’s where I am.
The whole thing has been super confusing for me, including categories to register the business under, etc… and everyone seems to have a different outlook, but one thing in common …to just keep it super simple. So I set it up just as a regular LLC in Nevada.
Anyhow, I just wish I had seen this post 2 weeks ago!
. So as mentioned in the last paragraph of the second link, always ask a CPA before filing if you’re unsure.