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PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4515
Experience:  35 years tax experience, including four years at a Big 4 firm.
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I am trying to set up a fictitious business name real estate

Customer Question

I am trying to set up a fictitious business name for my real estate team. I am a realtor that is working in KW brokerage.
My question is if I should set it up under a corporation rather than as an individual.
I also like to be able to get the maximum benefit on taxes with this structure. Here is what i normally have to file each year.
1. Homeowner for 2 properties (for past 15 years)
2. Landlord- real income for 1 property (4 years)
3. W2 employment as an engineer (20+ years)
4. Real estate Agent (1 year)
5. Investor income from stocks. (with short term gains) (1 year)
Please advise me for what template and structure would give me the most protection and tax benefits.
Thank you
Rupie
Submitted: 1 year ago.
Category: Tax
Expert:  Tax.appeal.168 replied 1 year ago.

Establishing a business as a sole proprietorship provides no legal protection to you and is not advised. Starting out, new small business owners typically opt for setting up the business as an LLC or an S-Corp. Between the two, S-Corp. seems to be more popular. For a comparison between the two, see below:

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The similarities

LLCs and S corps have much in common:

  • Limited liability protection. With both, owners are typically not personally responsible for business debts and liabilities.
  • Separate entities. Both are separate legal entities created by a state filing.
  • Pass-through taxation. Both are typically pass-through tax entities, and while S corps must file a business tax return, LLCs only file business tax returns if the LLC has more than one owner. With pass-through taxation, no income taxes are paid at the business level. Business profit or loss is passed-through to owners’ personal tax returns. Any necessary tax is reported and paid at the individual level.
  • Ongoing state requirements. Both are subject to state-mandated formalities, such as filing annual reports and paying the necessary fees.

Differences in ownership and formalities

Ownership. The IRS restricts S corporation ownership, but not that of limited liability companies. IRS restrictions include the following:

  • LLCs can have an unlimited number of members; S corps can have no more than 100 shareholders (owners).
  • Non-U.S. citizens/residents can be members of LLCs; S corps may not have non-U.S. citizens/residents as shareholders.
  • S corporations cannot be owned by C corporations, other S corporations, LLCs, partnerships or many trusts. This is not the case for LLCs.
  • LLCs are allowed to have subsidiaries without restriction.

Ongoing formalities. S corporations face more extensive internal formalities. LLCs are recommended, but not required, to follow internal formalities.

  • Required formalities for S corporations include: Adopting bylaws, issuing stock, holding initial and annual director and shareholder meetings, and keeping meeting minutes with corporate records.
  • Recommended formalities for LLCs include: Adopting an operating agreement, issuing membership shares, holding and documenting annual member meetings (and manager meetings, if the LLC is manager-managed), and documenting all major company decisions.

Differences in management

  • Owners of an LLC can choose to have members (owners) or managers manage the LLC. When members manage an LLC, the LLC is much like a partnership. If run by managers, the LLC more closely resembles a corporation; members will not be involved in the daily business decisions.
  • S corps have directors and officers. The board of directors oversees corporate affairs and handles major decisions but not daily operations. Instead, directors elect officers who manage daily business affairs.

For more comparison info, you can refer to the following link;

http://www.bizfilings.com/learn/llc-vs-s-corp.aspx

Let me know if I can be of further assistance to you regarding this matter.

Customer: replied 1 year ago.
I read this already but makes no sense here. S corp more popular but LLC is better... then why is scorp popular?
But this is not what I was asking. I have seen this info on google searches plenty of times. I am asking something specifically for me only, nobody else. What is for me, how to structure myself, my business?A real estate trust for my rental property? Managing my investment incomes with other incomes from other streams. Where can I get the most write-off and ultimately greatest tax benefit. Again, this is only for me and there are no partners.
Expert:  Tax.appeal.168 replied 1 year ago.

I understand that you are asking for you, but you are not the only person to ever set up a business. I am here to provide you with the necessary information needed for you to make an informed decision. I mentioned that the LLC or the S-Corp is likely the best business structure for you. I provided you with the comparison between the two in hopes that you could make an informed decision, which apparently is not the case. My feeling is that it will not be in my best interest to continue on here, therefore I will opt out and release the question back into the question queue so that someone else may assist you. Have a good night.

Customer: replied 1 year ago.
Obviously, I am NOT the only person to setup a business. But what I wanted to know is I could structure my businesses.
Customer: replied 1 year ago.
Please refund me back. I will not ask any questions on this site again.
Expert:  PDtax replied 1 year ago.

Hi from Just Answer. I'm PDtax. I can assist if you wish.

If I don't hear back this morning, I will advise site management to process a refund.

Customer: replied 1 year ago.
Pls close my inquiry. Just an fyi, you guys should have told me a realtor cannot setup an corp or llc only a broker can do a corp. Pls fix the servititude and knowledge of your team! I will not be using your service again