Business Entity Structuring

There are many different entity structuring types that have been made available to the business entrepreneur today. Many, if not all, of these can be implemented in the real estate business. Choosing the correct one is only a matter of your needs and desires as far as which direction you want to take your business. The flipper side of your business should be a corporation and the C-Corporation is the one that is best recommended. The keeper side of your business is recommended to be an LLC. But you don't need to get the LLC involved in a flipper corporations business.

If you find a property and you are considering keeping the property and putting a lease tenant in it, you will want to permanently transfer the property from the C-Corporation over to the LLC never to be heard from again by the C-Corporation. It is on these properties that you will get long-term capital gains from.

But then there is the possible scenario where, at some point after transferring it to the LLC, the tenant decides they would like to cash you out because they have a mortgage available.

In this circumstance you would want to take the profit in the LLC, which is the whole idea so you can get long term capital gains on it. Keep in mind that you're not going to get taxed any higher in that LLC then you probably would in the C-Corporation. In C-Corporations you only get tax breaks for about the first $75,000 or so which is considered the net operating income. After that you're in the same tax bracket as you are individually. In fact, after all this, you're higher then you probably are in your individual tax brackets.

This is literally considered a sell now because you transfer it to the LLC for the loan balance. Doing so means that there is no taxable gain to the C-Corp and your basis is the loan balance in your LLC.

Another important thing to remember is to take the title to these properties in a land trust. The fact that you're taking title in the land trust means that really an entity has not been decided yet to own this property. This is because you haven't filled out a trust agreement yet, and you haven't reported it to the IRS. Until you report it on your tax return you can do anything you want with these properties.

For additional information on real estate investing and the hot foreclosure market, I recommend joining Ron LeGrand's Millionaire Maker Newsletter The newsletter itself is loaded with great tips and resources, and he's usually giving away something free like a CD or something that generally has a lot of great information on it.