[Ari Newman]

Ari Newman

Hi All,

I’m trying to determine the best structure, and the necessary entities so that I can create a new Solo 401K (for me/wife) and rollover funds from my existing 401K. My current business (where the 401K plan exists) is a single member LLC, w/Scorp election and in a field not related to real-estate . In the real-estate world, my primary focus has been on rental properties, master-leasing, notes and the occasional quick-flip. I am looking to create a legitimate business, that would pay us a salary and also allow us to continue to make retirement contributions. I’d love some feedback on this idea:

Create a multi-member LLC, (me/wife; later on the kids?) and take the S-corp election. We would primarily act as a property management firm, but only manage properties that our other entities own. We would create management agreements (with ourselves), hold annual meetings, collect rent and pay ourselves a salary, file 1120-S Tax return, etc. The only downside to this scenario, is that most of the rent revenue would become ordinary income in the new company, instead of simply being an entry on schedule E. There might also be some other tax disadvantages that I’m not aware of. Other services that the new company would provide; Notary, project management, etc. All these would be ordinary income activities in my mind.

Given the type of business services that we would provide, is this the best course? Any other suggestions would be most appreciated!

Ari

[Jackie Lange]

Jackie Lange

There are so many different things to consider when setting up entities. If you’re married you would go one way, if you’re not you’d go a different way. If there are children a different consideration.

It is best to consult with a CPA in your area who specializes in tax strategy.