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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3837
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi: I am a realtor. Just recently filing a new name xxxx

Resolved Question:

Hi:
I am a realtor. Just recently filing a new name xxxx Inc. in June this year(this is a one person corporation), filled out the form of ARTS-GS, and completed Statement of Information. I am self-employed realtor. Whenever asked my CPA any questions of what kind of corporation should I open and always never get any correct answer even getting more confusing. I am a single, renting a place to live, paying installment loan payment to my car but not leasing. Will be flipping properties for short term with my partner 50% each TIC. Just purchased one for flipping on short term. This year will be doing 2 to 3 times short term flipping properties and each sale price may be around $400,000 to $600,000. Also I will be buying investment multi units properties for long term in receiving rental income this year.

1) Where can I apply the EIN number as soon as possible because my bank requires it ASAP? Does it require pay the fee around $200 to apply for it or is it free?

2) Is it better to put my company name Inc. on the title vesting so all my business expenses such as all escrow closing fees, remodel fees, and the "short term" capital gains(if I am correct after the property sell to next buyer) will be allowed to deduct all business expenses instead of under my personal name?

However, I purchased one flipping property recently in May this year and the money invested came from my personal name bank account. How about the remodel fees, does it have to be coming from the business bank account or can I write the check come from my personal bank account as I have filed a corporation now.

3) Still confusing what kind of corporation should I use C-corp or S-corp as a self-employed realtor, renting a room and paying installment auto loan per month(not leasing) both under personal name, as I still don't know my new X Inc. is under C-corp or S-corp?? Which one will be more suitable for me?

4) Recently purchased a short term flipping property. After it gets sold, thinking about doing 1031 exchange, so should my title must be under company corp. name or is ok even under my personal full name for tax purposes?

5) If renting a room and paying installment auto loan per month(not leasing) all under corporation name instead of under individual personal name, is it able to deduct 100% as business expenses? How does it work if under corporation name for tax purposes?

Thanks.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

1) Where can I apply the EIN number as soon as possible because my bank requires it ASAP? Does it require pay the fee around $200 to apply for it or is it free? ... https://sa2.www4.irs.gov/modiein/individual/index.jsp

NPVAdvisor :

2) Is it better to put my company name Inc. on the title vesting so all my business expenses such as all escrow closing fees, remodel fees, and the "short term" capital gains(if I am correct after the property sell to next buyer) will be allowed to deduct all business expenses instead of under my personal name? Either way ... If you set uyp as a passthrough like a sole proprietorship LLC , etc ... everything flowas through to your personal 1040 anywqay

NPVAdvisor :

How about the remodel fees, does it have to be coming from the business bank account or can I write the check come from my personal bank account as I have filed a corporation now. Smae answer... if it's a ligitimate business expenses, you can write it off ... some things will be a write off and some things will add to you basis in the property (depending BOTH on the item and on holding period)

NPVAdvisor :

3) Still confusing what kind of corporation should I use C-corp or S-corp as a self-employed realtor, renting a room and paying installment auto loan per month(not leasing) both under personal name, as I still don't know my new X Inc. is under C-corp or S-corp?? Which one will be more suitable for me? Really depends on your business model .... I recommend an LLC, as it provides the liability protection and personal capital benefit without the doube taxation of a C-corp

NPVAdvisor :

4) Recently purchased a short term flipping property. After it gets sold, thinking about doing 1031 exchange, so should my title must be under company corp. name or is ok even under my personal full name for tax purposes? Again depends on whether you do it as a pass-through or not.... ownership needs to be the same

Customer:

how can I close the screen and see your answer much clearly as I only can see a few columns?

NPVAdvisor :

a string of other things too.... like klind property, qualified intermediary, buying up, not down, etc etc

NPVAdvisor :

5) If renting a room and paying installment auto loan per month(not leasing) all under corporation name instead of under individual personal name, is it able to deduct 100% as business expenses? How does it work if under corporation name for tax purposes? You can use the portion of the room that used exclusively for business with the home office deduction and on the car i I would use mileage, much easier than actual cost ... can't do both

NPVAdvisor :

I'll mov e us to Q&A so you can see everything

Expert:  Lane replied 1 year ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

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Expert:  Lane replied 1 year ago.

Hello there ApplePie!

I'll be glad to answer these one at a time ... You've asked SEVERAL questions here, and almost every one of them must be answered with "it depends," to answer accurately (without more information).

Let me know where you'd like to go from here.

But please, lets take them one at a time... good questions, all.

Lane
Customer: replied 1 year ago.

Hi professional adviser:


Thank you so much for your promptly response.


 


1) You recommend an LLC, as it provides the liability protection and personal capital benefit without the double taxation of a C-corp. My CPA told me an LLC filing fee based upon the calendar year total gross amount, but the taxation is always based upon the total profit and loss, right?


 


2) What are the big differences between LLC, C-corp and S-corp? Why LLC provides more liability protection than Corp?



3) After I get a new EIN under Inc., will I able to change from Inc. to LLC or close the Inc. to apply filing a new LLC? Need to get another new EIN for LLC or use the same one before from Inc. EIN?



Thanks

Expert:  Lane replied 1 year ago.

1) You recommend an LLC, as it provides the liability protection and personal capital benefit without the double taxation of a C-corp. My CPA told me an LLC filing fee based upon the calendar year total gross amount, but the taxation is always based upon the total profit and loss, right?

With an LLC, (as well as S-Corps, partnerships and sole proprietorship) you have what's called pass-through taxation ... meaning that the company doesn't actually pay any income tax. It's passed-through to the person, the owner. So yes, you have it; the income (OR loss) flows through to line 12 on the individual's 1040 tax return (business income or loss)



2) What are the big differences between LLC, C-corp and S-corp? Why LLC provides more liability protection than Corp?

Actually ANY corporation provides that liability protection (C-Corps, S-corps AND that hybrid animal, the LLC) are looked by state law (now this is corporation law, state law, nothing to do with taxes) as a separate legal entity. Lawsuits, creditors, etc. cannot come after your personal assets for the liabilities of the corporation ... and the LLC? (the Limited liability Company) ... is actually a hybrid, that provides the liability protection of a corporation, with the flexibility of a partnership.

So the LLC, the S-Corp and the C-corp ALL provide that same liability protection ... where as the partnership and the sole proprietorship are essentially the people ... no corporate veil, as they say, no liability protection.

Now, TAXATION is a whole different issue. Sole proprietorships, partnerships and LLCs (that don't ELECT to be taxed as a C-Corp) are, again pass throughs... the profit and loss simply flow through to the owner(s), whether the take the money out of the company or not.

Only C-Corps and IRRevocable trusts pay their own taxes (at corporate and trust tax rates, respectively), so the decision about taxation is really a different decision from the one about liability protection ... one is a tax law (both federal and state) and the liability protection issue is a state law (how do I set up - incorporate or not -my business) issue.


3) After I get a new EIN under Inc., will I able to change from Inc. to LLC or close the Inc. to apply filing a new LLC? Need to get another new EIN for LLC or use the same one before from Inc. EIN?
In California you can originally set up as one of the following:


Corporation
Limited Liability Company
Limited Partnership
General Partnership
Limited Liability Partnership
Sole Proprietorship

THEN, next you can elect how you want to be taxed.... and that's a state department of revenue and federal (IRS) issue.

Generally you can set up as a Corporation OR LLC and then elect with IRS to be taxed as an S-Corp (a pass through, but still a corporation) OR a c-Corp (a separate taxable entity, and still a state corporation)


Hope this helps

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3837
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 2 other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.

Thanks so much for the rating!

Let me know if I can help again.

Lane

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