At Koontz & Associates, we are committed to helping real estate professionals do two things:
This guide will explain what type of business entity real estate professionals should create, how to report to the IRS (quick reference infographic) and why you should do it this way.
Very few real estate agents know that they can make more money by creating a business entity and not filing Schedule C of their 1040. You may be under the impression that it is confusing and expensive. We are here to debunk these myths and show you that partnering with Koontz & Associates will help you earn more money each year.
The most popular entities to set up are Professional Association (PA) or a Professional LLC (PL). Ultimately, the decision of what entity to establish is based on size of your company, the nature of your business, your legal relationships and your tax consequences. For real estate professionals, these factors almost always result in the creation of a PA or PLLC.
Establishing your entity is the first step to reducing your tax liabilities. Now let's see how to properly use your entity.
One of the biggest mistakes many agents make is forming a PA or PL, but never changing their license with Florida Real Estate Commission (FREC). The problem is that commission checks will continue to come to your individual name and you wont reap the benefits of your business entity.
Here is how to property use your entity:
Ultimately, you will be acting as a business rather than an employee. Why? If you don't act like a business, the IRS, nor any court, will treat you like a business.
80% of agents report their income on a Schedule-C of their 1040, which is the best way to ensure you are paying the highest tax.
We recommend taxing your PA or PL as an S-Corp for two big reasons:
As an S-Corp, you will still be a PL, but taxed differently. Most agents don't know about this or they think it's too complicated. It's not! Here is how to do it:
Get in touch with one of our attorneys immediately if you have any questions. You can begin using your entity benefits as soon as you establish it. There is no benefit to waiting until next year.