How to Set Up Your Real Estate Business Structure (Step-by-Step)
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- Опубліковано 31 тра 2024
- If you use THIS real estate business structure, you could pay fewer taxes, have less liability on your hands, and grow your portfolio to new heights without having to worry about losing it all. If you don’t set up your real estate business correctly, you could face larger lawsuit threats, accounting and bookkeeping nightmares, troublesome tax filings, and headaches that aren’t worth the extra houses. Today, expert flipper, BRRRRer, and investor, Tarl Yarber, will walk through how he sets up his businesses.
Tarl is primarily a house flipper. With over 600 homes finished (yeah, 600!), he’s had to face a LOT of risk and a mountain of taxes. Thankfully, he learned sooner rather than later that setting up your business the right way with LLCs, S corps, attorney protections, and more can help you dodge Uncle Sam’s obsession with your wallet. But, even if you’re NOT a house flipper and just invest in rental properties, Tarl shows how you should be setting up your business so you have the least headache with the most passive income possible.
Would you set up your business this way? Did you do something different? How would you rate Tarl’s handwriting? Let us know in the comments below!
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What’s the Most Powerful Business Entity for House Flippers?
www.biggerpockets.com/blog/ho...
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LLC vs. S Corporation: Which Is Better for Real Estate?
www.biggerpockets.com/blog/s-...
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The Difference Between LLCs, C Corporations, and S Corporations:
www.biggerpockets.com/blog/di...
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LLCs for Rental Properties & Bulletproof Asset Protection:
• LLCs for Rental Proper...
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Connect with Tarl on BiggerPockets:
www.biggerpockets.com/users/t...
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Follow Tarl on Instagram:
@tarlyarber or / tarlyarber
00:00 How to Set Up Your Real Estate Business
01:20 Active or Passive Income?
03:06 BEFORE You Start
06:21 The Active Income Business Structure
16:56 Who SHOULDN'T Do This
19:07 How Many LLCs Do You Need?
19:59 The Passive Income Business Structure
23:37 Don’t Make Tarl’s Mistake
This is packed with such great info and the context that goes along with it, thank you so much!
This video is a game-changer for aspiring real estate entrepreneurs. Building a solid business structure is crucial for long-term success in the industry. I'll be sharing this invaluable resource with my community of real estate enthusiasts who are eager to establish a strong foundation for their ventures. Keep up the excellent work!
I was just asking chatGPT to set up my corporate structure yesterday! Impeccable timing. BP doing it’s thing as always
Perfect timing of this video! Thank you.
Thank you Mr. Tarl Yarber!
This was very informative!
Awesome episode thank you so much.
Great information Tarrl! Thanks
This was awesome episode. My future properties will def go to my LLC. I’m just concerned about annual expenses when filing taxes
Same and their are some bad people with evil attentions
Man this video is gold bro thank you 🙏🏾
Love this! Thank you!
Thank you. Great video
Great episode, guys.
Great informative video!
Great info!
Great explanation Thank you
I'm assuming on the active side with the scorp you're able to setup a solo 401k. Do you know if you could setup a solo 401k on the passive/holding llc?
The thing I would like to hear about is what and how to layer in then use of trusts , both living and irrevocable. I know we all feel like we will live forever, things happen. Especially if invested in CA properties on the passive side, things like step-up at member death (eg umbrella llc with partner members can introduce all sorts of issues). Additonally: minimum annual tax liabilities, property tax basis considerations (especially when where partners are used) have considerable considerations to work through when building in estate planning considerations. Would hate to see those assets go though probate and get hit with inheritance tax, and potentially even loose cost basis step-ups because things were not done right. Example question: who actually is the member of the holding company? You and your wife, or your trust. If your trust, does is still protect your corporate vail, or does it get compromised because it is potentially just a single member (a big reason for a partner is to help shore up the vail). What and how do you set up a irrevocable half upon the death of a spouse or do you? The point being, estate planning and even the use of irrevocable trusts while alive as part of that estate plan or income plan is a super critical part of a healthy corporate structure for these types of businesses, especially on the passive side.
Do you have separate bank accounts taking the income for each LLC or just one for the holding LLC for passive income?
Question: you mention only filing 1 tax return with the passive income structure of a holding LLC. That has been my goal but not a reality with my CPA. Do you avoid creating EIN numbers for the baby LLC's and only register an EIN with the big holding LLC? And if so, when you get a mortgage loan on a property in a baby LLC, who is the loan to? wouldn't most lenders require lending to the baby LLC because it holds the property, and therefore it needs an EIN and needs to file a return?
Is a STR active or passive income if you own the property?
Some people suggest that for active income it is better to have C-Corp as you save more on taxes which allows you to spin more money and grow it faster. Sure later you will get double taxed, but still. There are 2 books on this from Clint Coons
Question-
How many times can a property re enter the foreclosure / sheriff sale auction listings?
(Watched a home 3 yrs now on/off right before auction time)
Why does a property enter the foreclosure auction list and then be removed before auction?
Unlimited times. The owner came forward and paid the outstanding amount before the deadline. They have up until the minute the auction begins.
Why do you need a separate holding LLC for passive income rental properties?
The holding LLC does not disclose your identity, so it makes it extremely difficult for anyone to trace your property back to you.
Are there tax advantages to the passive structure or is it purely for liability protection?
Passive income is not subject to Social Security or Medicare taxes (about 15.3%).
as far as I know, no tax benefits of having entity structure for passive. Only liability, because in the eyes of IRS, there isn't any entities if they are all disregarded, so everything is in your own 1040. There might be something about having it taxed not as disregarded in order for lenders to count 100% of rental income when it comes from W2 or K1 instead of rental income which they would use 70-80%.
17:30 Why would you have more than 1 S Corp? If your S Corp is your main operations company then ALL of your different operations LLCs should flow into your 1 S Corp.
Having more than 1 S Corp is like having more than 1 Holdings LLC or more than 1 Living Trust. What's the point?
I have a great CPA and a great bookkeeper. They are able to bring my taxable income way way way down so I paid very little in taxes. However, then I cannot qualify for Loans, what do I do to qualify for Loans if I’m not paying anything in taxes?
Don't bring your income down so far, yes you will pay more in taxes but then you'd qualify for loans. I believe that's about the only way.
@@JasonColdham thx 🙏
check Clint Coons books. But generally you cannot have cake and eat it. If you are showing to IRS that you don't make money, you cannot expect lenders to give you money, right?
I say they (WE!) should stop double taxation - taxation on both the income AND the expense side -, and have perhaps a single tax on the expense side, say VAT on everything purchased, no matter if it's purchased by a private entity or a corporation, but at the same time have no income tax and no corporate tax.
Just imagine how much time and expense would be relieved from EVERYONE, including the states and the IRS and the police etc. etc. etc. So many people could start doing productive work: IRS employees and accountants would probably be great at any sort of research, maybe even at areas of engineering. And there would be no need to monitor people and corporations to see if they are paying the 'proper' taxes; no need to investigate them, no need to reinforce ultra complex tax laws, to sue, to jail, to squeeze... How much better world would it be!
Just a nit on your Wyoming LLC. Husband/wife co-owners are generally not treated as one person, but rather as partners in a LLC partnership entity
8:20 How is Long Term Capital Gains *not* holding the asset more than 12 months?
If its a property you intended to "flip" and not intended as a "rental" or long term hold, then its active income and not capital gains. The key, is the intent.
CPA here. I own my 3 houses in my single-member LLC which I own 100% of. I do not elect any C-corp or S-corp status on the LLC for tax purposes.
S-corp or C-corp is very bad for rental real estate.
The level of insurance you purchase for each house matters a lot more for liability protection than the differences between LLC/Corp.
Can you get some better markers please
Mr. Tarly, you said that your wife is not a partner; are children a partner?
This guy’s voice sounds like Vlad’s from VladTV
Learn to use the apostrophe. You don't just add an apostrophe every time you put S on the end of a word. Every apostrophe you put on that whiteboard is a typo. Amateur hour.
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