By Rick Pridemore
Mr. Pridemore is currently a REIA board member, and has been a real estate investor since 1989. Over almost 2 decades he has developed vacant land, rented single family dwellings, and built new homes (both site built and modular.) He has also traveled the country conducting training seminars and attending
trade shows. Rick is a licensed real estate agent, specializing in both high end and investment properties.
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I'm a beginning rehabber, and I'm wondering what the best structure for my business would be, in order to minimize taxes. (Sole propreitor vs. S corp,C corp.,LLC etc.)
This question comes up often, and there really isn't a "one size fits all" answer. Many factors can affect which route is best for each investor.
Questions that need to be answered include:
- Is real estate going to be your full time vocation?
- Do you have any partners, and if so, how many? What are their roles? Are they passive or active investors?
- How much income do you make at the present time? Do you need the ability to write off excess income?
- Are there other assets that need protection?
REIA of Oakland had a tax panel recently, and the general consensus of the attorney and CPA's present was that an LLC is generally the best way to go. Their tax planning presentation handout went through various scenarios and pointed out the large tax advantage of an LLC. I would highly suggest contacting them, as they specialize in real estate investment planning and can help you maximize your profits. The best time to get your legal and accounting team in place is right now, before any decisions are made that you might regret later.
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