A lot of people have been asking me whats the best way to properties. If you’re doing pre-construction flips you want to either do it in a C Corporation or a retirement plan. If you flip too many homes a year, IRS will stick you with dealer status which means you lose a lot of real estate tax breaks. If you use a C Corp, the C Corp may get dealer status, but you are shielded. I like to use retirment accounts like a qualified corporate pension plan or an IRA to flip properties. That way i dont have to worry about taxes for many years.
For properties that you plan on holding for a long time, I believe the best way is to use an LLC. The LLC should not be managed by all the members, but instead have only one manager. That manager should be a C Corp that owns 1 to 5%. Even though all parties in an LLC are supposed to have liability protection, I’ve heard that a sharp attorney can pierce that. However, if the manager is a C corp and no other members are involved in the running of the LLC, its more difficult to do that. Only the C Corp is liable in case of lawsuit, and if structured properly it can provide better asset protection. Not only that, if the LLC has elected to be taxed as a partnership it will get optimal tax benefits.
For more information, I heartily recommend Albert Aiello’s “Real Estate Investor’s Goldmine of Brilliant Tax Strategies”.