No. of Recommendations: 3
Here are my thoughts on this section of your response Scot--

In the meantime, having been involved with a few small corporations (either as an owner or manager), I'd say that the answer to your question all depends. For a sole owner operator, looking to either A) buy and flip; or B) run a few properties as rentals, and where in neither situation do you expect to draw a paycheck, it doesn't make sense to use a C Corp, since the only way to get the profits out of the corporation and into your pocket is to take a dividend. The C Corp will first get taxed on its earnings, then you will get taxed on the dividend. Very bad on a scale of good to bad.

If I wanted to minimize my taxes (in the ST) wouldn't I be in the best shape if I used a C corporation and ran all the profits through that? This way I would only pay 15% taxes on the first 50K, whereas with an S or LLC I end up paying my current rate (already 28% and only going up). Then I can keep the profits and re-invest them into more properties. And keep 13% more of the profits because of the taxes. Perhaps even more if I pay myself a small salary, but keep my personal income in the 28% range. I don't need the profits for myself in any way so they can just keep rolling over in the business. This is one of the reasons why I think a C corp might be the best choice for me. Although books specifically say "Don't use a C corp for Real Estate".

Perhaps I'm off base??

Confused Matt in KC
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.