The first years of my real estate investing in Port Angeles WA,  I ran my business as a sole proprietor because I really didn't know any better. Luckily, I survived with only minimal damages, but there comes a point when it is time to assess the best legal structure to use for Port Angeles real estate investing.

If you ask 10 experts you are likely to get 10 different opinions. With that in mind, I'll share my opinion and experience. Remember: free advice is always worth what you pay for it.

If you are a beginning investor, it's probably best to not worry about asset protection until you actually have a few assets to protect. Why spend time and money setting up a business entity and creating tax reporting requirements unless you need to? It's like buying full coverage auto insurance on a beat--up Gremlin...what's the point?

Once you have assets and something to protect, then it's time to set up your business structure. Question # 1: what is your net worth? Question # 2: do you have assets that are at risk? If the answer to either of those questions is, "Yes," then you need to take the next step.

Assuming you want to set up an entity for wholesaling Port Angeles properties, the most popular are an LLC (Limited Liability Corporation) or a C Corporation. There is much debate about which one is better, but I prefer the C Corporation because the first $50,000 is taxed at 15% and you can have a kick-butt employee welfare plan to write off many expenses. With an LLC, the income is passed through. If you start making money, you'll wish you could pay only 15% on some of it! Trust me on this one.

Why is the tax issue such a big deal?

Here's a simplified example. If you make $100K personally you are taxed on the full amount (35%) and have $65,000 left. Anything you buy for yourself comes from after-tax dollars. However, with a C Corporation if you could make the same $100K on paper, but have $50K in allowable expenses that you can write off. So you get taxed on that $50K at 15% and only have to pay $7,500 in taxes compared to $35,000 on your personal income.

What type of expenses can you write off in a C Corporation? It depends on how your Port Angeles Company is structured (see your accountant/attorney for details), but you can often write off basic expenses of things like a bed or even a swimming pool. You're thinking, "No way!" Let me explain how it's done. If you have an employee welfare plan that covers your medical expenses and your doctor gives you a prescription for aqua therapy, it's possible to write off the cost of the swimming pool. Yes, it's crazy, but I don't make the laws. Another more common example is a prescription for a new bed if you have a bad back. I have a "Sleep Number" bed myself, just like Paul Harvey J.

A very wealthy man once told me "It's very hard for a C Corporation to make any money!" What he was trying to illustrate was that C Corporations can expense pretty much everything and look like there is little or no profit. You still can buy the same stuff, but you are taxed less if you structure things correctly.

There is a lot of free information available to you about buying, selling or investing in Port Angeles real estate. For complete information about the Port Angeles real estate market including, current homes for sale, property values, foreclosures, short sales, relocating information, …..Really….. Providing everything you need to know about Port Angeles Washington Real Estate ….Please visit my website at:  http://port-angeles-real-estate.com

Please feel free to contact me (Steve Edwards) at anytime. I’ll be happy to answer / address any questions or concerns you may have.  Call me… I can be reached on my cell at: 360-809-3064 or by email at steveedwards@olypen.com

I know your time is valuable and I’ll make every effort to respond to you within the hour….

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Thank you!
Steve Edwards