I'd recommend the LLC
The LLC is one of (if not The) fastest growing entities out there, because it provides the corporate liability
of the corporation with the flexibility of the Sole-proprietorship/partnership
(depending on the umber of owners).
A limited liability company, (LLC), requires the least amount of paperwork and lowest fees to register and is well-suited for small businesses, especially single-owner ventures like real estate investments, because (the LLC doesn't file a separate return
lets you get the lower long-term capital gains
rate that individuals
enjoy, but again, provide the liability protection that's so important in business.
If you use the S-Corp you have to set up payroll, pay yourself a salary, do quarterly payroll tax
returns pay in payroll (FICA) taxes
at least monthly, do an annual payroll tax return AND get not tax advantage until you are profitable enough (over and ABOVE the salary and other expenses) that there may be some Self Employment tax savings
Pluses and minuses of the C-Corp (from an excellent article by the lawyers at Chron:Shareholders
in a C-corp face potential double-taxation, as the corporation has to pay taxes on its profits, which are taxed again when shareholders receive distributions
of these profits and have to report them as income. Because of this, real estate investors often choose to be taxed like an LLC or S-corp. However, the Bigger Pockets real estate blog cautions that while there are some taxes to be saved with an S-corp, it also comes with more IRS
scrutiny and can make an audit
more likely. Also, it can be easier for a C-corp to qualify for bank financing, because the individual's credit history isn't reviewed, like it would be with an S-corp.
Bot***** *****ne? .. Since the LLC can choose at any time to elect S-Corp taxation (IRS form
2553) OR C-Corp taxation (IRS form 8832) the LLC is then place to start.
... and many real estate investors .. because of the combination of flexibility and liability protection, choose to stay there.
Let me know if you have questions...