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CA's and taxes


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#1 efete

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Posted 04 August 2009 - 06:22 AM

Hi all;
Hope everyone is having a great summer! Quick question(s): how does everyone structure their deals and deal with taxes. When doing CA's, assignments and flips are considered income/dealing/etc, and I assume get hit with the double tax (SS and income). What is the best way to deal with that? I am setting up an LLC as I want to add rentals to my business, and that is the best structure for those, but I am trying to figure how to deal with the above issue.
Also, how risky are CA's in general? In other words, is it truly necessary to do CA's in an entity or just do them in your own name and do the long term investing in the entity?
One last question, related to above. How are you able to use your business' $ if it is in an entity? If you need cash, just do some CA's in your name or is there a way to do them in the entity and utilize/loan yourself funds, etc.?
Sorry for all the questions; I appreciate any advice! Thanks!!

Eric
Eric

#2 Dave T

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Posted 04 August 2009 - 09:32 AM

Eric,

Even though you referenced taxes in your question, you really don't have a tax question. For most investors, a business entity is tax neutral. That is, you have the same income tax bill regardless of whether the investing is done in your own name or from within a business entity. Business expenses are still deductible even if you are operating as a sole proprietor with no formal business entity in place.

The decision on whether to use a business entity and which entity to use is unique to each individual and depends upon your personal net worth, your investment strategy, your liability exposure, your estate planning needs, and other factors your estate planner, your attorney, your tax advisor, and your CPA might suggest. The entity decision is not a one size fits all solution, but needs to be made in consultation with all of your professional advisors' participation.

I personally fail to see the value of a business entity for low net worth individuals. Until you have a net worth greater than $2 million, I suggest that investing in your own name and purchasing adequate business liability insurance is sufficient.

#3 efete

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Posted 04 August 2009 - 10:46 AM

Eric,

Even though you referenced taxes in your question, you really don't have a tax question. For most investors, a business entity is tax neutral. That is, you have the same income tax bill regardless of whether the investing is done in your own name or from within a business entity. Business expenses are still deductible even if you are operating as a sole proprietor with no formal business entity in place.

The decision on whether to use a business entity and which entity to use is unique to each individual and depends upon your personal net worth, your investment strategy, your liability exposure, your estate planning needs, and other factors your estate planner, your attorney, your tax advisor, and your CPA might suggest. The entity decision is not a one size fits all solution, but needs to be made in consultation with all of your professional advisors' participation.

I personally fail to see the value of a business entity for low net worth individuals. Until you have a net worth greater than $2 million, I suggest that investing in your own name and purchasing adequate business liability insurance is sufficient.


Dave;
Thank you for the follow up and for the advice. If I am just doing CA's, what business insurance is best? Thanks again!

Eric
Eric




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