We recently purchased a beach area triplex with the intention of converting it to a short term rental property after doing major renovations. The property is still recorded under our names, however we plan to deed it over to a single entity LLC for liability protection in the next couple of months. I was contacted by 800-accountant today and was advised that we should consider an S-corp to take advantage of more write offs, etc. Perhaps they were looking to sell more billable hours, but I’d like to confirm if there is merit to this recommendation. As I understand it, there would be more complexity and paperwork involved with the S-corp. We also plan on operating the property as a host in the beginning and would like to know the most ideal entity to operate the business that maximizes liability protection and tax savings, without being overly complex. I have a W2 job as my primary income, so this would be a side gig. Lots of conflicting information out there depending on who we ask. Any advice you can share would be appreciated.
And you have sought a 2nd opinion from your current accountant who says…?
I have formed an S-corp in the past (unrelated line of work) and I wouldn’t do it again. There are good legal reasons (corporate veil) to form one for certain business types, none of which apply to mine now. I don’t recall any tax advantage to having an S-corp that I can’t take advantage of on Schedule C under my disregarded LLC EIN (day job) and my disregarded DBA EIN (VR biz).
You need to consult a lawyer.
They contacted you. You didn’t contact them. Red Flag! Into the Trash.
Yes, I have also asked my accountant. He had originally recommended the single payer LLC/disregarded entity when we were planning to hold it as a long term rental. I have asked for an update based on the STR model.
Very good point about the red flag. There were a few red flags, including an end of day “deadline”.
Thanks for the feedback on your experience with using an S-corp. I too prefer the disregarded LLC for it’s simplicity.
It costs me a small fraction to do my tax returns now. My CPA made a lot of money doing my corporate returns, so no wonder a tax preparer is trying to steer you that way.