Episode 17 – Entity/Corporate Structures and Tax for Land

Michelle: Welcome to the “InFlow” podcast. I am your host, Michelle Bosch. I see a gaping hole across society that focuses on the outer work and forgets about the inner work. When what we really need is to bridge the gap between prosperity and spirituality, to live a life in flow, with inflows of light, inflows of cash, inflows of creativity, inflows of grace in our lives. Each week, join me for powerful messages and interviews that will leave you inspired and ready to step into flow in your higher work. So, now, let’s go.

Welcome to the Inflow Podcast…I am your host Michelle Bosch…I’m very happy to be sharing some time
together with you again today!
I have been recording quite a bit of guest interviews for future episodes and I learn a TON from all of the
powerhouse women on the show but I also enjoy sharing some of my experiences with you all on these
solo episodes.
See my goal with this podcast is to reach as many women and men as I can and share what I have
learned about wealth, money, real estate, business building, health, vitality, spirituality and faith…of
course I would like to see many more women can live prosperous lives following their passion instead of
struggling financially or having no passive cashflow in their life.
And in order for me to reach more people… if you like the episodes that you have listened thus far or if
this is your first episode and you enjoy it please do me a favor and leave me a “written review” which is
very important to me. It doesn’t have to be long…it can be a one liner and it would mean the world to
me because it helps be more easily found on Itunes in this time of so much NOISE.
Also if you enjoy the content I share… go ahead and pass on the podcast episode with your spouse, your
friends, and important women in your life interested in making REAL MONEY in real estate and holistic
success.
So now moving on to today’s topic. I’d like to share my experiences on the super sexy subject of entity
or corporate structures. I am not a CPA or a legal profession so this isn’t legal advice but I can share with
you our experiences….at the time of this recording the dreaded April 15 th due date for taxes is coming up
so it is great timing from that point of view but also very important….especially if you are an active
investor in real estate. If you are investing in your own name or outside of an LLC you may end up paying
more taxes than you should and not have the liability protection you should have.
Plus I always get asked a question of entity structures at our Land Profit Generator Live events…which by
the way we have one coming up on April 26-28 th here in Phoenix. If you would like to get more
information on this content packed event or register you can go to www.landprofitgeneratorlive.com.
We are expecting over 200 people here in Phoenix so if you are interested in getting a seat…seats have
been flying as our Land Profit Generator Family grows so you should check out
landprofitgeneratorlive.com and register right away.
Entity structuring is also very important if you are syndicating equity for larger multifamily apartments
or if you are investing passively with syndicators into multifamily apartment projects but I will go deeper
into that subject on a separate episode.
So today I will talk about the balance between liability protection and tax advantages when setting up
corporate structures and the Different types of entities out there we have used in different seasons of
our investing journey.
So when we started investing in land, Jack and I had pretty much no money… we had approximately
$3500 to our name and creating an entity or LLC was not on the top of our list. Everything we had…we
made payments on…we had payments on our house, our car, on our couch, on our laundry machine, on
our bed set, etc etc and so we figured that on the liability protection side nobody could really come after

us because we literally owned nothing and as far as cash reserves…well we didn’t have those either
except for the $3500.
So when we started our TOP priority was to make money and to make it as fast as we could. So our very
first couple of land flips where done in our own name which is something I absolutely do not
recommend. The whole point of sharing experiences is to help you avoid costly mistakes. So after a
few land flipping deals we realized how important it is to be set up correctly to not only have liability
protection but to preserve the cash we were creating. Having the right corporate structure helped us
retain as much as we could in our business for working capital and to continue to expand on inventory
of land or reinvest into marketing for our business.

So going back to our story..very quickly after about a year or a little less than a year when we were doing
year end tax planning with our CPA we found out how important it would be to be set up correctly
especially in the case of flipping land using seller financing.
Something I highly recommend is to not leave it till the end of the year to do tax planning. This is
something that you should be proactive about and doing once a quarter with your CPA. I know of
investors that are having to write large checks to the IRS because they are not set up correctly.

So some of the corporate structures we have and continue to use are the Limited Partnership, LLC’s
taxed as an S-Corps or LLC’s taxed as a C-corps.
We’ve used the limited partnership to avoid self-employment tax. In the Limited Partner, there are
limited partners and General Partners. We as individuals have been limited partners and our General
Partner since inception has been and LLC and over the years based on other investments and asset
classes we have invested in it has changed from it being taxed as a C-Corp to an S-Corp.
Now moving on to LLCs,…A limited liability company (LLC) is a corporate structure in the
United States whereby the owners are not personally liable for the company’s debts
or liabilities.Limited liability companies are hybrid entities that combine the characteristics of
a corporation with those of a partnership or sole proprietorship meaning… meaning It is a
business structure that can combine the pass-through taxation of a partnership or sole
proprietorship with the limited liability of a corporation.
So in our case our General Partner is an LLC taxed as either S-Corp and the income flows through to us
as individuals. This General Partner is the active one doing and conducting the business of land flipping
for our Limited Partnership or LLCs that are disregarded entities owned by our Limited Partnership. So
the actual Land is owned by the Limited Partner or disregarded entity LLCs that roll up to the Limited
Partner.
In case you didn’t know A disregarded entity is a business entity that is separate from its owner
but which elects to be disregarded as separate from the business owner for federal tax
purposes. In our case the owner of our disregarded entity LLC’s is the Limited Partner.

You might be asking well why do you need disregarded entities that roll up to your Limited
Partnership?
In our case we want to limit our liability exposure to only so many pieces of land in one LLC.
We’ve never held more than 75-100 lower priced pieces of land in one LLC we have never had
this happen but If someone breaks a leg while visiting a piece of land or while making payments it will
be important to limit your liiability and even carry some kind of umbrella insurance against properties
you hold in inventory across all your LLCS. You need to decide together with your legal counsel the
level of exposure you are comfortable with.

So for us The higher the value of the piece of Land the more likely we will have fewer in one
LLC and if the piece of land is a total gem worth over $250,000 then we will only have one of
such properties inside one of the disregarded entity LLCs…again this is to limit our liability
exposure within each LLC.
We also have a C-corp that is a Marketing LLC that has helped us alot – we have been able to shelter the
first $75,000 to $100k in net income from our personal higher tax brackets into a lower tax bracket—
The only thing you need to know about a C-corp though is that it is difficult to get money out of it unless
it is in the form of a loan.
Another point worth mentioning is the importance of having LLC’s with Different fiscal year ends. This
has allowed us to legally pass through income from one LLC to another LLC with a fiscal year end in the
future and defer the tax liabilities NOT AVOID the tax…we are not talking about that but instead to differ
having to pay it 6 months into the future and use the income instead for working capital while at the
same time creating A LOT of expenses on that second LLC to minimize the tax impact. Again I am not a
CPA or legal and tax professional so you want to make sure you get the proper advice based on what
exactly you are doing and everything else you have going on in your businesses.
Basically on either LLC you want to Prepay as much as you can before fiscal year end on services you will
use anyway to always be minimizing your tax liability.
As we have added asset classes within real estate such us houses that we buy and hold and apartment
syndications our entity constructs have evolved of course. Also as we moved from seasons in life
without children to a season with children our structure has also evolved to include into this equation
estate planning but I can in a future episode with an expert guest about that.
Another point I wanted to mention is a little known secret advantage to land when it comes to dealer
status and seller financing that you don’t have with house flipping. If you are declaring yourself a real
estate professional meaning you are doing 120-150 hours of real estate related activities and your
intention is to hold land for less than a year, which we are because we are doing land flipping you will be
considered a dealer and will have to pay taxes on the full amount of profits you make regardless of
whether you sold the land for cash or on terms. If you sold for cash than this is not an issue because you
will have the cash to pay taxes in the year the sale took place. However if you are selling offering seller
financing you will get say $10,000 down on a $100,000 property and you will only realize profits as you
receive monthly payments and those will come in in 5, 10, 15 years depending on the length of your
note. But if you had to pay tax in the year the sale took place on a full Profit when all the cash you

received was the down payment that would not be good and quickly put you out of business because
you won’t have the cash profits because those profits are coming in every month for several years in the
future not be realized in the year the sale took place.
Well Our CPA who is a genius and is the walking tax code was able to find an exception a little known
loophole so that you and I only pay taxes on profits as they come in even though we may be dealers in
the eyes of the IRS. So that is pretty cool.
I hope you found this episode helpful if you are a beginning active investor flipping land. As always it is
great spending time with you. And if you want to jump start your land investing business and meet and
network with high caliber land investors go to register for our next Land Profit Generator event here in
Phoenix happening in April at www.landprofitgeneratorlive.com. You can also join our free facebook
group called the Land Profit Generator Real Estate Investing Group.
If you found this episode helpful…leave me a 5 Star review. And have a fantastic rest of your day!

Michelle: Thank you, bye-bye. I hope this episode left you feeling inspired and ready to get inflows of cash, inflows of light, and inflows of faith in your life. I welcome your reviews on iTunes, please leave me a review and help me create an amazing community of women InFlow. Thank you as always for sharing your voice by going to michellebosch.com and joining the conversation about this show. And while you’re there, grab a copy of my “Ten Commandments to Living A life Inflow.” You can also follow me on Facebook @michellebosch and on Instagram @michelleboschofficial. Thank you very much and until the next one.