When you first set up a business, you need to decide upon which entity best serves you, your company and satisfies the IRS. This is what I refer to as a ‘necessary evil.’
It seems so daunting at first but really, it doesn’t have to be if you just seek a little advice upfront. Now, please don’t misunderstand me, I am not the one that is going to give you that advice as it should be a CPA or attorney. But I will tell you what I did and how we did it and who we have, that helps us to keep it all on track! And, you are smart women, so I know you can figure it out from there. If not, just send me a message. If I can’t answer it, I will lead you in the right direction!
Currently, we have an S-Corp, a corporation and various LLC’s. My real estate business as a realtor is in an S-Corp as in that business, I am a single corporation. In essence, it is just me, not a big corporation. My taxes are filed accordingly, and my income reported as an S-corp. Our commercial properties are held in a corporation because they are part of the bigger picture on our investment properties. That corporation manages the other aspects of our businesses, so it acts like a management company in addition to holding assets (our commercial properties). And then, we have LLC’s which hold some of our single-family homes. We don’t overload these entities for liability reasons so we have a handful and will place a few houses in each one. LLCs are what are referred to as pass through entities which means the income from these entities passes through to your personal income and then your CPA files your income accordingly.
You don’t need to have a complete understanding of entity structure unless you happen to be in that field or have an unhealthy interest in complicated and boring structures (😊). But you do need to make sure you have the right people on your team that understand it. As I mentioned above, it might be an attorney and/or a CPA or accountant. They can give you advice on what type of entity works best for you now and maybe will have different advice as you grow.
Most people will start with an LLC since it is a pass-through entity. You can set this up on your own by going to the Secretary of State website. Or, you can pay your accountant or attorney to set it up for you. If you do it yourself, it is a very small amount. When we did ours it was $10! I haven’t had to set one up in a long time so check it out first. An attorney or CP would be $500-$1500. That might just be an investment in yourself and your business, so you decide which way works best for you.
The benefit of doing this is you are now able to write off several things that have to do with your business. Again, refer to a professional, but it can be things like office supplies, computers, cars, gas, event venues, travel and the list goes on. It is worth the pain to get things set up correctly from the beginning!
If you don’t know where to start, there are a few places I would suggest. First, get on your local Facebook community page and post a request for a great Accountant/CPA/Tax Attorney! People are very vocal about who they do and don’t like! You can also go to LegalZoom.com and get the advice from an attorney on that site and they can set up your entity structure for a fee. For accounting, you can look at Xendoor, Bookkeeper 360, Block Advisors or just get your own Quick Books account and teach yourself a new skill-set! You never, know, you might just turn that into a new business!
If you find a good resource, let me know! I am always interested in what is out there that can help to build our businesses!
I know you’ve got this! And if you don’t –RBR!!! Then pull up those big girl panties and go for it! You are a total and complete W.I.N._Her who has everything set up right and has it all together!
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Sincerely,
Karen Schaefer
Founder of W.I.N.; the Women’s Wealth and Impact Network
