I get a lot of questions on entity structuring. It is a complicated but important subject.
Some time ago, I found out that with C-corporations, your earnings are retained within the corporation. With an S-corporation, the earnings drop through to you personally, same as an LLC. An LLC allows the owner to retain the limited liability so you lose only what you invest in the company. That is just a very brief overview.
Please know that it is much more complicated than that however. I began my company without any of that. I wasnt an LLC or a C-corporation or an S-corporation. I started out as a DBA. This means Doing Business As
This DBA cost us a whopping $20.00 in Ohio. So I send in my $20.00 and I named my company BMW Properties. You probably think the name is inspired by the German cars that cost a nice chunk of change in this country. Not quite. Its named after Brittany, Mark, and Wendy. They are my three kids. My brother came up with that idea. So BMW Properties was the name of my first company and Ive still got the rights to it.
So I was doing business as for a while. Then I decided to go with a C-corporation. Now some of you are going to say youve got additional taxes on that. Youre right. But I decided to be a C-corporation because I wanted to retain earnings within the company. I was working a j-o-b and I already had an income stream there I didnt want anymore income dropping to me.
I wanted to keep the earnings over here for personal reasons. Thats what I went with the C-corporation idea. I was also partnering with someone else. Many of you are not incorporated yet. My advice on this is to do it, the sooner the better. Make a decision and go with it.
Its great if youre an LLC. If its an S-corporation, thats awesome. If its a C-corporation thats wonderful. My bottom line here is, just do it.
When I started out it cost me $485 to incorporate. If youre going to be in the business of flipping houses for profit you need that level of protection. So you might as well start immediately.