We are incorporating...

[Lucas]

Hi REIN,We are starting an Lease-to-own/We Buy Houses/Holdings company. We plan on holding properties for up to 5 years. We also plan on doing "flips". We are just about to launch and anticipate alot of activity from the beginning...thus its important to us to set things up properly to begin with.

We are looking for suggestions regarding structuring the company.

How can we best set things up from a tax perspective? We understand that if we earn, we pay but we would like to minimize our taxes and take advantage of corporate tax benefits and write-offs.

Also, from a qualifying perspective? We don`t plan on doing too much qualifying...especially to begin with...but just in case a really good deal comes up.

How are YOU structuring your company? Please, if you have a similar company and you transact on atleast 3 to 5 properties per year, let me know how you are organizing your company and why...We would REALLY appreciate the insight.

I do recall some threads on this but I cannot locate them.

Thanks in advance,

Lucas

 

[Thomas Beyer]

QUOTE (Lucas @ May 21 2010, 12:51 PM)
..

I do recall some threads on this but I cannot locate them.


a "writeoff" is an expense. Some expense you have anyway, say an office (or home office) or a car or a computer.



You can deduct what is reasonable and actual .. whether it is a corporation or personally held.



An expense is an expense .. keep them LOW .. better to focus on INCOME i.e. TOP LINE .. then the bottom line will take care of itself.



In a corporation you can have a lower income tax up to $500,000 in active income (i.e.. flipping or services) but not counting rental income (as it is deemed passive) but you still must take money out and then pay taxes.



Taking money out of a corporation comes in 4 forms:

a) employment income, or

b) management services, usually with PST and GST (or HST)

c) dividends, or

d) shareholder loans



However you usually depreciate an asset such that there is usually no taxes payable until asset is sold.



Here are some thoughts: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-10292-54272-To_create_a_company_or_not.html#54272



Consider class A voting shares for control and class B non-voting shares for dividends for partners, spouse, kids, family members to get money out of a corporation.



To separate liabilities do NOT have your spouse as a director or sign a personal guarantee on mortgages !



A director of a firm is personally liable for GST not paid or unpaid employee deductions/taxes !



I have opened and closed dozens of companies. Call or better e-mail me with SPECIFIC questions as generic questions ("what is best") get generic ( aka "it depends") answers !

 

[Lucas]

Thank you very much Thomas!! I will definitely send over some questions...



Lucas




QUOTE (ThomasBeyer @ May 21 2010, 09:13 PM)
a "writeoff" is an expense. Some expense you have anyway, say an office (or home office) or a car or a computer.



You can deduct what is reasonable and actual .. whether it is a corporation or personally held.



An expense is an expense .. keep them LOW .. better to focus on INCOME i.e. TOP LINE .. then the bottom line will take care of itself.



In a corporation you can have a lower income tax up to $500,000 in active income (i.e.. flipping or services) but not counting rental income (as it is deemed passive) but you still must take money out and then pay taxes.



Taking money out of a corporation comes in 4 forms:

a) employment income, or

b) management services, usually with PST and GST (or HST)

c) dividends, or

d) shareholder loans



However you usually depreciate an asset such that there is usually no taxes payable until asset is sold.



Here are some thoughts: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-10292-54272-To_create_a_company_or_not.html#54272



Consider class A voting shares for control and class B non-voting shares for dividends for partners, spouse, kids, family members to get money out of a corporation.



To separate liabilities do NOT have your spouse as a director or sign a personal guarantee on mortgages !



A director of a firm is personally liable for GST not paid or unpaid employee deductions/taxes !



I have opened and closed dozens of companies. Call or better e-mail me with SPECIFIC questions as generic questions ("what is best") get generic ( aka "it depends") answers !

 

[Lucas]

Consider class A voting shares for control and class B non-voting shares for dividends for partners, spouse, kids, family members to get money out of a corporation.

This looks interesting.

I am in partnership with another person in this company and they are NOT apart of operations. They are strictly funding operations and deals as they come up. Is the above a good way to internally structure the company?

Also, say we are holding 10 properties for 5 years, 15 properties for 2 years, 5 properties for 1 year and we do 5 "flips" over a fiscal period, what is the best way to structure a Real Estate comapny. (ie. Holdiings Company XYZ hires Management Company ABC for operations and Mgt Co. ABC hires Renovation Company QRS to perform renovations etc...By the way all those companies would be owned by us...) This seems complicated but I recall reading something like this. Is this too complicated? What are the benefits of doing it this way?

Thanks,

Lucas

 

[Thomas Beyer]

QUOTE (Lucas @ May 22 2010, 06:56 AM) I am in partnership with another person in this company and they are NOT apart of operations. They are strictly funding operations and deals as they come up. Is the above a good way to internally structure the company?
yes .. class B shares for daughter .. class C shares for wife .. class D shares for uncle ..

QUOTE (Lucas @ May 22 2010, 06:56 AM) Also, say we are holding 10 properties for 5 years, 15 properties for 2 years, 5 properties for 1 year and we do 5 "flips" over a fiscal period, what is the best way to structure a Real Estate comapny. (ie. Holdiings Company XYZ hires Management Company ABC for operations and Mgt Co. ABC hires Renovation Company QRS to perform renovations etc...By the way all those companies would be owned by us...) This seems complicated but I recall reading something like this. Is this too complicated? What are the benefits of doing it this way?
yes as you separate "holding" i.e. passive income from active corporations