Q:

I have been reading your blog and your site for some time now.  I am an accountant, but not a tax cpa.
 
My question is:
 
If I rehab house for future sale, I will probably be classified as a dealer.  I have 3 other partners providing capital and services.  Should I record those sales in a C, S, or an LLC that is classified as a partnership.  I will have some rental income as well form some of the properties, but the majority of the positive cash flow will  come from the sale of the rehabed residences.  Each sale will net 50-75 K with about four per year.
 
Any quick insites would be very helpful, but if you can't thanks for your site and ideas.

A:

I hope my previous writings have made it clear that there is no such thing as a "one size fits all" for situations such as yours and the services of a tax pro to set up a customized game plan would be well worth the cost.

Having said that, I will share what I have seen work in many cases.

For profitable businesses owned by just one person or a married couple, a C corp usually makes the most sense.

For businesses that have multiple owners who are not married to each other, LLCs have been very effective for keeping everything straight for that specific business.  Each owner then has to decide wither to own his/her shares in the LLC in their own personal name or through a C corp that they own themselves.   There are a lot of benefits to using  layers of ownership, both in regard to taxes as well as liability.

Good luck.  This should give you a starting point when consulting with your own tax pro.

Kerry Kerstetter

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 12/12/2004 03:46:00 PM Send this post: