The Story of the Real Estate Agent and the Series LLC


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We had a lively discussion on business structures on this past Saturday’s webinar. If you missed it, you can catch up on this and other archived webinars at: http://www.USTaxAid.com/insiders-club/

Here’s one of the questions we weren’t able to get to in the allotted time.

“I am a realtor, I have my rental properties set up as series LLC. I would like to begin flipping properties. Can I consider the flipping as a “hobby” instead of setting up an “S” corp?”

We talked about a wide range of topics, including the IRS claiming some businesses with losses were hobbies and the way to use a Series LLC in a business to save costs and protect assets.

That’s what led to the confusion and the question from this attendee.

If you have a business with a loss, you want to make sure you get the tax benefit of the loss. If you have income, the IRS is going to make sure you have business status so you pay both income tax plus self-employment tax. That’s why we normally want businesses to be either an LLC taxed as an S Corporation or formed as an S Corporation. S Corps do not have pay self-employment tax.

You also will want to hold your real estate agent/broker business within an LLC taxed as an S Corp or as an S Corp. I wouldn’t suggest putting both together because if something happened with one business, it could impact the assets of the other business.

Since you have a Series LLC, it won’t cost you much to establish another cell. Depending on the state in which it was formed, you probably won’t have to register the cells so there is no ongoing cost.

My suggestion would be to get a cell set up and elected as an S Corp before you start buying and flipping property. You’ll pay less tax and protect your assets right from the start.



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