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Lane
Lane , JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 9215
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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ok, now please answer the question :)

Resolved Question:

ok, now please answer the question :)
Submitted: 3 years ago.
Category: Finance
Expert:  Lane replied 3 years ago.

NPVAdvisor :

Thx, you bt

NPVAdvisor :

(bet)

NPVAdvisor :

First ... Sole proprietorships, LLCs partnerships and S-Crops are all pass-throughs (for tax purposes) .... this means ....

NPVAdvisor :

that you get to use losses against other income, get lower capital gains rates, etc. that a C-Corp, where everything is taxed TO the corporation at Corporate rtes.... Further

NPVAdvisor :

a C-Corp has that doble taxation you've heard about .... first the c-corp is taxed, then if you wan to distribute dividends, you pay personal taxes on that again

NPVAdvisor :

and finally, on that...

NPVAdvisor :

THe other side of that coin is that profits on those pass-through are taxes immediately whether their paid out or not ... the C-Corp can hold the earnings and apply toward, R&D, for example, and no one pays that on that piece

NPVAdvisor :

Now, from a protection standpoint, SOLE PROPTIETORSHIPS and PARTNERSHIPS are no-nos

Customer:

lol, yes i have heard they are no no...i just used them to get started

NPVAdvisor :

your personal assets and income are not legally separated from the business... so business lawsuits, creditors, etc can come after you personally

NPVAdvisor :

I personlly believe the LLC is the best place to start (has the flexibility of the partnership, but the liability of the corporation)

NPVAdvisor :

Further, you can alwasy elect to have the LLC taxed as an S-corp later (by using form 2663) once you have that good problem of having to npay toommuch self employment tax

NPVAdvisor :

but the LLC doesn't require nearly as much "administrative ocerhead as the S-Corp)

NPVAdvisor :

sorry for the typos "overhead," ... corporate tax return (even though its distributed and taxed to the person, just as the LLC is as a default)

Customer:

Ok, so from a tax and protection standpoint, given my current circumstance:

- I own multiple pieces of income property at this time all in my name.
- I plan to own more pieces of income property. Some completely held by me and some held by me and investors
- i own a service business at this time...in my name

My THOUGHT based on what you are saying is
- i need to set up all of my ownership(s) to Real Estate title in one company
- my ownership + investors ownership to Real Estate title in another company
- the management of those properties in another company
- my service business in another company

What are your thoughts on which entity to choose so that i have the best protection and tax savings? ALL THESE IN LLC? OR DO I NOT EVEN NEED ALL THESE SEPARATED?

NPVAdvisor :

What state are you n?

Customer:

...i also heard trusts are good for holding title???

NPVAdvisor :

The reason I ask is that you may want to consider a Delaware "SERIES LLC"

Customer:

CA right now

Customer:

but my properties are in CA, AZ, CO

Customer:

i also plan to acquire more in LA, TX, FL w/ help of investors

NPVAdvisor :

ok, many form an LLC in order to protect personal assets from a legal claim relating to their real estate investment or business liabilities. ... Further, ...

NPVAdvisor :

Additional liability protection may be gained by properly forming and maintaining a separate LLC to hold each property or business entity

NPVAdvisor :

A "Series LLC" may be able to pay a single set of annual state fees and may be able to file one income tax return each year. In addition to the administrative streamlining, the key value is that liability incurred by one unit does not cross over and jeopardize assets titled in or allocated to other subsidiary units of the same Series LLC

Customer:

AHHHHHHHHHH

Customer:

i see

NPVAdvisor :

You're really beginning to sound like a series LLC or the Delaware Business Trust may make sense for you

NPVAdvisor :

With that many locations, the COST of several LLC's and the need to registed in all those state can get high

Customer:

so in effort to streamline all this protection and tax benefit(s) how would you set this up as me? Given what i said above w/ my current circumstance and future projections

NPVAdvisor :

Delaware is more expensive at the onset, but have BY FAR the largest body of business law, underwriters and angels are familiar, and if it's been don in business structres, Delaware's done it

Customer:

im small now, comparatively speaking, but want to set myself up right so that i have all these "containers" to go dumping the proper allocations in (i.e. title here, mgmt there, business there, etc.)

NPVAdvisor :

Right... Spend a little time with this huy's piece ... It's advertising but he's right ... and it sounds like this is where you may be headed

Customer:

ok. let me open up a new question w/ you.

Lane and other Finance Specialists are ready to help you
Expert:  Lane replied 3 years ago.

Thanks Arah ... I do have a 4:30 (ea) but lets see what we can get done


lane
Lane and other Finance Specialists are ready to help you