Which Real Estate Entities Are Best For Real Estate Investors?

Frank Chen

Corporations – C Corp

quick turn cash deals – wholesale flips, rehab and retail, options, etc.
great liability protection, great fringe benefits but must generate tons of cash to take advantage of all the benefits
losses don't flow through to personal tax return, S Corp that has many of same benefits and allows losses to flow thru personal tax returns

LLC

choice of management – member managed or manager managed
choice of tax treatment – sole proprietorship, partnership like S corp, or corporation like C corp
operating agreement provides flexibility
good choice for long term holds and short term deals

Limited Partnership

limits liability
limited control over management and day to day activities
requires General Partner to assume management/liability – possibly 2nd entity as General Partner – costs, hassle, etc.
flow through tax treatment
good choice for long term holds

Considerations

state requirements (varies by state and year) – paperwork, fees, taxes, maintenance
business primarily short term deals or long term holds or combination
advice – attorney, CPA

In summary, if you ask around, you will get all kinds of responses as to what's best, but you likely do NOT need to set up an entity before you've done several deals and know you will continue with this business. At that point, it makes sense to get advice from a very knowledgeable real estate attorney and tax accountant as to the best choices for your own personal situation. Please take the time to leave your comments for this video below and please subscribe to our channel so you'll be automatically notified when we upload more quick video tips for you. Take care and good investing.