[Troubled Loner]

I’m a professional in the tax field, and I feel the need to address these issues. There is a lot of misinformation out there! I get similar questions all the time from my small business owner clients who are considering incorporating, and seem to be under the impression that a corporation is the greatest thing in the world.

1) re tax issues and corporations, double taxation does occur with a C corporation; this can be avoided by choosing to be taxed as an “S” corporation, where all profits flow through to the shareholder(s). However, until net profit is at least $30,000 or more, it is generally not advantageous from a tax perspective for someone to be incorporated, due to the ability to have some of their income be distributions that avoid the 15.3% self-employment tax. Some things to consider, if a small business goes from a sole proprietor to an “S” corporation, and that small business was taking the home office deduction, they cannot take that deduction as a corporation. For many clients, this results in the loss of a substantial expense deduction. Also, once becoming a corporation they must become an employee of the corporation, which brings on all the hassle of payroll and regular IRS reports and filings; most people pay a payroll company such as Paychex to do their payroll, thus taking on more expenses. Another expense is the annual $800 which must be paid to California. Also, certain benefits that one can set up as a sole proprietor cannot be utilized as an S corporation. Keep in mind all the formalities of starting and maintaining a corporation. It has to done right, and maintained legitimately, otherwise the corporation will not be taken seriously if challenged (“piercing the corporate veil”).

2) re: asset protection of a corporation – typically those who stand to benefit the most from incorporating are those who own a business and have employees who could potentially do harm to others, for example a delivery driver who hits a pedestrian with the company car while on duty. In this example, if the corporation were to get sued, only the assets in the corporation are exposed. Conversely, if a sole proprietor’s employee were to hit someone with their car and were sued, none of the owner’s personal or business assets would be protected, such that their house, car, savings, etc would be exposed.

There seems to be a belief that if someone is incorporated that they can get away with just about anything and not be exposed to legal action and/or loss of their personal assets. This is not true. If you negligently run down someone on the street and get sued, the corporation is not going to protect you and your assets.

3) Nevada corporations – unless you want to hide your identity, becoming a Nevada corporation is a waste of additional time and resources (same with a Nevada LLC). Some think that they can avoid the $800 California FTB annual tax, this is not true, they must register with CA if they are doing business in CA, and still pay the $800. Plus you need to have someone in Nevada be available for service (they’re not going to do this for free…)

None of this is to be taken as tax advice. This is general information, each person’s individual situation needs to be evaluated to determine what business entity works best for them.

[Troubled Loner]

I visited their website to see if there were reserves on the properties, or if banks were allowed to bid up prices (this was present in the last auction we saw a few months ago). I did not find anything that addressed this, do any of you know if this auction will have unknown reserves and/or if banks are bidding up prices?

If not, I view the auction as a way to kind of see where the market is right now.

[Troubled Loner]

I visited their website to see if there were reserves on the properties, or if banks were allowed to bid up prices (this was present in the last auction we saw a few months ago). I did not find anything that addressed this, do any of you know if this auction will have unknown reserves and/or if banks are bidding up prices?

If not, I view the auction as a way to kind of see where the market is right now.

[Troubled Loner]

I visited their website to see if there were reserves on the properties, or if banks were allowed to bid up prices (this was present in the last auction we saw a few months ago). I did not find anything that addressed this, do any of you know if this auction will have unknown reserves and/or if banks are bidding up prices?

If not, I view the auction as a way to kind of see where the market is right now.

[Troubled Loner]

NSR,

The banks are just waiting for the market to start picking up again, then they will sell those REO’s at a healthy profit. Should be happening very soon, since we’re at or near bottom (I heard it from Treasury Secretary Paulson)

[Troubled Loner]

NSR,

The banks are just waiting for the market to start picking up again, then they will sell those REO’s at a healthy profit. Should be happening very soon, since we’re at or near bottom (I heard it from Treasury Secretary Paulson)

[Troubled Loner]

Too many people will not have the luxury of waiting this cycle out, as homeowners did in the early nineties. We are going to see a growing number of banks and homeowners that will have to sell, adding more to inventory, forcing prices downward, and spooking out potential buyers.

My opinion is that we see an accelerated downturn in prices towards the end of this year, bottoming out (getting to rational fundamental prices) by the end of 2008, and then hanging out on that bottom for 5 or 6 years. I don’t think we will see todays prices for at least 10 years, unless wages and inflation rise significantly.

It hasn’t gotten bad yet, there are still people who think that homes are really worth what they’re selling for in SD. There are people who think now is a good time to buy before prices start going up again. The psychology hasn’t shifted yet, when it does, it will be ugly. How many of us remember what it was like in the early-mid 90’s? The last thing anyone wanted to do then was buy a home.

[Troubled Loner]

Too many people will not have the luxury of waiting this cycle out, as homeowners did in the early nineties. We are going to see a growing number of banks and homeowners that will have to sell, adding more to inventory, forcing prices downward, and spooking out potential buyers.

My opinion is that we see an accelerated downturn in prices towards the end of this year, bottoming out (getting to rational fundamental prices) by the end of 2008, and then hanging out on that bottom for 5 or 6 years. I don’t think we will see todays prices for at least 10 years, unless wages and inflation rise significantly.

It hasn’t gotten bad yet, there are still people who think that homes are really worth what they’re selling for in SD. There are people who think now is a good time to buy before prices start going up again. The psychology hasn’t shifted yet, when it does, it will be ugly. How many of us remember what it was like in the early-mid 90’s? The last thing anyone wanted to do then was buy a home.

[Troubled Loner]

New home sales stats are a joke because what is counted as a sale is when someone makes their initial agreement and deposit. It does not take into account that many of the buyers will not follow through with their purchase. With cancellations running as high as ~35%, the stats are meaningless.

[Troubled Loner]

New home sales stats are a joke because what is counted as a sale is when someone makes their initial agreement and deposit. It does not take into account that many of the buyers will not follow through with their purchase. With cancellations running as high as ~35%, the stats are meaningless.

[Troubled Loner]

Overall, it looks like there are still a few idiots left out there…

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