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I bought a in Avalon, Ca as an investment property. What…

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I bought a triplex in...
I bought a triplex in Avalon, Ca as an investment property. What business licenses do I need? What do I need to file, and do I need to set up an LLC?
Submitted: 4 months ago.Category: Real Estate Law
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Answered in 37 minutes by:
12/8/2017
Real Estate Lawyer: Legal Eagle, Lawyer replied 4 months ago
Legal Eagle
Legal Eagle, Lawyer
Category: Real Estate Law
Satisfied Customers: 10,321
Experience: Licensed to practice before state and federal court
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Hello! I am a licensed attorney, admitted to practice in state and federal court. I have a nearly 100% satisfaction rating (click here for more info) so all that means is that you can count on me to help today. Because I want to provide you with the most accurate answer possible, do you mind if I take a moment to review your question?

Please keep in mind that our conversation does not include an attorney-client relationship and this is for general information purposes only.

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Customer reply replied 4 months ago
please review my question
I bought a triplex in Avalon, Ca as an investment property. What business licenses do I need? What do I need to file, and do I need to set up an LLC?
Customer reply replied 4 months ago
I also reside in california.
Real Estate Lawyer: Legal Eagle, Lawyer replied 4 months ago

So, before I continue, were you informed that you needed a business license to purchase a triplex?

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Customer reply replied 4 months ago
no
Customer reply replied 4 months ago
but i'm renting them out, or doing a short term VRBO on one
Customer reply replied 4 months ago
i have renovation expenses
Real Estate Lawyer: Legal Eagle, Lawyer replied 4 months ago

Gotcha. Well, just so you're aware, it's not required that you start a business. Are you looking to do so to move the triplex into your LLC?

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Customer reply replied 4 months ago
No, I do not have an LLC or S corporation or anything like that. I just want to be able to write off the expenses of the renovations which are pretty costly and I'm collecting rents so I assumed I had to have a license of some sort. also will be writing off the interest.
Customer reply replied 4 months ago
I'm assuming I will pay taxes on the rental income, if any.
Customer reply replied 4 months ago
Am I wrong? Can I not write off expenses?
Real Estate Lawyer: Legal Eagle, Lawyer replied 4 months ago

Ok, so if you are looking to set up a business, it's relatively simple. The general steps is that you need to take is to:

1. Check the secretary of state's office to see if there is a business name that is similar.

2. Pick a name.

3. Choose a registered agent (a person to accept lawsuits)

4. Prepare an LLC operating agreement

5. then file the LLC paperwork with the state. Pay the $800 LLC fee.

An S-corp is something you would file for at the end of the tax year which will help limit your taxes to 1.5% for the year, otherwise California charges you similar to a C-corp,which is very expensive.

And yes, you can write off the expenses for renovations or anything else that costs to help keep the business afloat. Does that make sense?

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Customer reply replied 4 months ago
If I choose not to start a business can I still writte off the expenses without the business entity? I'm guessing no...
Customer reply replied 4 months ago
Also, do I need an LLC? Can I just file S-corp at the end of the year? I think that is how my Dad does it since he is not an LLC.
Real Estate Lawyer: Legal Eagle, Lawyer replied 4 months ago

I'm so sorry for the delay. One moment...

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Customer reply replied 4 months ago
no problem. Thanks
Real Estate Lawyer: Legal Eagle, Lawyer replied 4 months ago

Ok, I'm sorry about that. My phone range unexpectedly. So odd for a Friday afternoon. Okay, if you choose not to start a business, you may be able to write off some expenses, but they would only be the ordinary write offs that a property owner would have. If you start a business, then you can write off business expenses related with refurbishing costs and rental costs that come along with this.

Also, most people get an LLC if they are going to start purchasing property because it is a good business entity to have. It's complicated, but you can maintain your LLC and then file as an S-corp strictly for tax purposes. You won't be considered an "S-corp" as far as the secretary of state is concerned, but you'll be treated as an S-corp strictly for tax purposes. Or, you could avoid being an LLC altogether and just register strictly as an S-corp, but usually an S-corp requires a board of directors. Your end of year tax filing as an S-corp will be the same as if you were an LLC (complicated, I know).

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Customer reply replied 4 months ago
Who is best prepared to help me sort this out, a tax accountant?
Customer reply replied 4 months ago
That's my last question:-)
Real Estate Lawyer: Legal Eagle, Lawyer replied 4 months ago

I think that if you go to legalzoom.com or myllc.com, they can help you get set up for super cheap; however, when it comes tax time, you should work with an accountant. Just know this:

1. You can set up as either an LLC or an S-corp.

2. An LLC can have the expenses of the property written off. An S-corp can do the same.

3. Both of them shilld your personal assets from liability.

4. An S-corp requires a board of directors, an LLC does not.

5. There's a difference between registering and filing as those different entities. Registering in this context means you are registering with the state of California. Filing means filing taxes.

You can file your taxes as an S-corp regardless of whether you initially register as an S-corp or an LLC. In California, filing for the end of year taxes as an S-corp has a 1.5% tax on the income for the corporation. If you are an LLC and do not file as an S-corp, you'l be given C-Corp status, which is much higher. If you are registered as an S-corp, you can file as an S-corp.

Does that clear it up?

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Real Estate Lawyer: Legal Eagle, Lawyer replied 4 months ago

I want to make sure you're 100% satisfied:-)

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