RealTalk had its genesis on Labor Day Weekend, 1995.

I was consulting with the REALTORS Information Network, a wholly owned subsidiary of NAR and was tasked with creating the online community component for the "RIN Network Desktop," a proprietary online service for REALTORS...what we referred to as the "private side of RIN." (REALTOR.com was referred to as the "public side of RIN").

On that Labor Day Weekend, I was able to assemble some of the best online real estate minds in the country in San Diego for a "working weekend."

In attendance were:

Myself

John Reilly, who I had only met in person one time prior to that weekend.

Mike Barnett, who I had not met in person until that weekend...having had "online conversations" with him on AOL (MBBarnett@AOL.com).

Jack Harper, who I had not met in person until that weekend...having known him online (WinPower@AOL.com) Richard Janssen - President of HomeSelect and the company that morphed into REALTOR.com Becky Swann - who I had met in person at a buyer broker conference in Boston a few years earlier, and who went on to create IRED.

Julie Garton Good - Author, trainer, and friend of John Reilly Ron Rothenberg - our online community guru and wealth of knowledge, who I only knew in an online environment prior to that weekend Linda Yakker - Tech consultant from Booz Allen Hamilton, the Technology Partner of RIN

From the meeting that weekend, The Real Estate Electronic Publishing

Company (now known as InternetCrusade, which is our DBA) presented to the REALTORS Information Network (RIN) a 90 page document and plan for publishing and training.

It was the blueprint for what we envisioned would become the online community for RIN (and NAR). We called the community RealTalk. The plan also included a training component or technology certification (The forerunner of e-PRO dubbed RCR, which stood for RIN Certified REALTOR and RCB, RIN Certified Broker). By August of 1996, NAR decided to scale down RIN and give the management contract for REALTOR.com to RealSelect (which evolved into HomeStore).

By October of 1995 we had the RealTalk "boards" up and running and a prominent list of moderators and topics of interest...The formal launch was at the NAR Convention and Trade Show in Atlanta.

The technology delivery vehicle for the original RealTalk was an online service that could be accessed over telephone lines (typically 9600

Baud) and the software was referred to as the "RIN Network Desktop (RND)". It was similar to a scaled down version of AOL...proprietary in nature, with six separate areas...e-Mail, Library, Geodata, Internet, Mall, and RealTalk.

When the RIN scale back occurred and the RIN Network Desktop was discontinued, Real Estate Electronic Publishing Company (now doing business as InternetCrusade) decided to fund and continue to create what we believed would become the number one online real estate community.

Most of the funding would be our time and expertise. Online training and community had become our passion... but we had lost our source of funding and needed a low cost technology alternative to the RIN Network Desktop. The technology we turned to on our restricted budget was the listserv. As it turned out, since most people check their e-mail multiple times a day, it was the perfect way to grow this community and encourage broad participation. We also had to grow the population which we did by going on a "Crusade," speaking at state and local associations across the country and at all the major meetings of the National Association of REALTORS.

Many of you on this list will remember the original RealTalk and its concept. It was well on its way to success when the plan was presented formally in our document entitled "Training and Publishing Plan."

Here is an excerpt from that document:

RealTalk

When it comes to online services, content is king. At the heart of this plan to provide top quality content to RIN's business and communication network are the National Electronic Publishers, a team of whom are arguably considered the most highly qualified individuals serving in this capacity on any online service in the world. RIN's Electronic Publishing Team of Saul Klein, John Reilly, Jack Harper and Mike Barnett have over 100 years experience in the fields of real estate, communication, law, and technology (see resumes in Supporting Documents Section). Together they lead a group of nationally known real estate personalities and subject area experts, who serve as Moderators, or discussion group leaders. In order to insure that content is current, accurate, and responsive to the immediate needs of the user, procedures have been set up to evaluate existing discussion corners, create new ones, and stimulate increased participation.

The current structure of RealTalk is as follows:

16 "Corners" (technically these are known as banners)

26 "Discussion areas" (technically known as books) 160 "Discussions (threads)"

What makes RealTalk different from most bulletin boards is that each area is monitored by an appropriate subject area expert, and the overall content is reviewed numerous times daily by the publishing staff.

In addition to the on going discussions, action plans have been drafted to create and implement a series of online seminars using expert panelists on hot topics and forums on "hot products".

A rich feature of these seminars is the ability to tap the wealth of knowledge of the audience, many of whom add a fresh perspective to the expert's discussions. Rarely is there time in live presentations to respond to audience questions and entertain comments. Because the online seminars are open for a two week period, there is ample time for all to participate.

Many authors/panelists are excited about the opportunity to obtain immediate feedback from the audience. In some cases, this direct contact with the end user motivates the experts to redirect their thinking about key issues. Transcripts from these seminars will be archived in the library for later review or downloading.

These online seminars can vary between open posting and narrow cast postings. This presents an opportunity to charge a fee for participation, which fee can partly be used to attract some of the more visible "for hire"

industry celebrities.

Also planned are online interviews with top industry personalities, including authors of leading edge books (e.g., John Tucillo). In some cases, technology vendors will pay a fee to be interviewed online and have the ability to explain the advantages of their products in direct dialogue with the consumer. Further content is made available by maintaining a software library for downloading helpful shareware and freeware, with the Publishers making certain the files are tested and scanned for virus prior to being made available in this forum. There is a RealTalk library to archive files and articles by Moderators and other contributors (including downloadable pass alongs, like checklists and forms that users can give to clients and prospects).

Recognizing that content is only valuable if it is easy to find and use, RealTalk will develop online features to facilitate the task of filtering down the information relevant to individual users; for example, use of the ticker tape screen; a splash screen for highlights; a "personal alert"

system. The most important user tool will be an efficient Search function, to identify by key words those topics appearing throughout the RealTalk discussions, library, and even RINmall. As a supplement to the RIN Training program, RealTalk will encourage online discussion of user problems, issues and shortcuts demonstrating how to use RealTalk to solve a problem and obtain free advice.

The original plan is closer to reality today than ever. Our blogs and new community tools, coupled with our continuing list servs will help us move online community in the real estate industry to the next level.

Thanks to all of you who have played and continue to play a part in this vision.

Saul

Saul Klein

CEO, InternetCrusade

-

Saul posts:

>>

You threw in a few extra elements Lenn...which online lead generators use MLS data to attract leads? How do they get that data?

<<

Who can't believe this question from Saul! Uh.....Saul,

let me step in here and answer that one for you - THE ANSWER IS ALL OF THEM. Realtor.com, HomeGain, ServiceMagic, and the next one will be Lowes with their new 10% offer. Like Jim Lee, I've played around with R.com (and many others) with an alias email address, and now get tons of spam trying to get my business through that email address. Same thing with HomeGain, SM and I'm sure all of the others.

If you run an ad in Homes and Land magazine, Harmon Homes, or your local paper, they ALL have online versions they sell banner advertising on to make more money, and they all offer up our leads as icing on the cake, phone numbers, email addresses, the promise of a mailing list to make someone money. What Lenn was alluding to below is that IF I pay for an ad in the paper or a magazine, or anywhere, that information should not be sold to anyone else. The leads should be mine, because I paid for that privilege.

What in the hell is the world coming to where someone doesn't understand the simple business practice of ethics and playing fair? I'll tell you what I did......I used an alias to run my most recent ads. It was under the psedomym of Dr. P. Beene - well guess what? I now get tons of spam, direct mail as well as phone calls all in the name of (yep you guessed it!) Doctor P. Beene.

It is time to take a stand to gain our industry back. I for one think it was a mistake to put our info on the internet for all to see, but hey, that was NAR working hard for our dues and Realtor.com a.k.a. Rip 'em off.com. Once we gave up our inventory, we now have to deal with the consequences, and it ain't a pretty sight. What

would happen if Doctors gave free x-RAYS? FREE rescriptions?

CPA's did free tax returns? The bottom line is this: WHY BUY THE COW WHEN YOU CAN GET THE MILK FREE?

It is like being in war, you have choices: Charge head on into battle, guns cocked and ready or fall back and take cover. I for one, am not the 'fall back' kinda person. I prefer to charge full on, weapons ready, take my chances and I will slit your throat or shoot you dead if you don't answer my questions immediately. I don't have a lot of patience or tolerance, I am well trained and know what I'm doing....you are either WITH me or you are against me. On the other hand, there are those that prefer to take the "wait and see" (fall back) approach.... Want

3 guesses as to where they are all working right now?

Paula Bean

Orlando, FL

Saul's note:

Paula...never be surprised by my questions...only my answers.

I often ask questions to generate thought because in some cases I find that people's responses are tied to emotion and not fact...that often people respond without checking the facts first. In some cases, I actually know the answers to the questions I offer for consideration ;-)

If you examine the aggregators you mention specifically, you will find that the information is provided by REALTORS or organizations controlled by REALTORS. This is an important concept. It is not stolen data, it is freely provided by those entitled to the data.

You say that since you pay to put an ad in the paper, you are entitled to the leads. I agree...AND...how much do REALTORS pay to put their ads on the Internet?

Would you be willing to pay to place your ads on the Internet? If no, why not? You (the generic you) seem to expect all the benefits that come from the infrastructure and exposure created by these Internet companies, at no cost. You say but my content is valuable...but how valuable is it if no revenue can be generated from the content?

If REALTORS paid for the Internet ad then they should be entitled to the lead, but what about the free ads? And don't tell me that your MLS/Local Association or NAR should pay for it...you want advertising, you should pay for it, and then you should be entitled to the results of that advertising (and in many cases with advertising, you are entitled to nothing because sometimes advertising produces nothing. "I know half the money I spend on advertising is wasted, but I can never find out which half."

... John Wanamaker)

As for the spam you mention you received when you put your e-mail address on an aggregator web site, I would say the reason for that is that spammers are harvesting the web site and not because the aggregator sold the e-mail addresses. Pretty common practice for spammers. Are there things people can do to reduce spam...sure, but often at a cost and of course everyone wants everything for free (this is a topic for another conversation).

10 years ago we talked about "Paradigm Shifts."

Today, we are seeing the manifestation of a paradigm shift in the real estate industry. It is the application of technology in the home purchase process.

Think about it...Home searches online, transaction platforms, web based MLS, IDX and VOW...limited service brokerage models, DOJ intrusion and more. The change agent is technology and a population more inclined to utilize the technology in an infrequent transaction (the purchase and sale of a home). It started (as predicted by Bill Gates in his book The Road Ahead) with high turnover products like books and it is moving to real estate, and all the signs are there and have been for sometime now. We are also beginning to see that Alvin Toffler was right when he said that "information is the currency of the 21st Century."

Instead of complaining about how we are being taken advantage of, it is time to ask the "Paradigm Shift Questions." We really need to step out into the future to prepare for the future. You cannot prepare for the future from the present.

Paradigm Shift Question 1:

What is currently possible to do in your business, and if it were impossible, it would fundamentally change the way you do business?

The following are questions, not positions.

Proposed Answer 1:

Currently possible: Commissions as a percentage of sale price.

What if that were impossible? Would it change the industry, and would that then change the business of real estate associations?

Proposed Answer 2:

Currently Possible: Free Advertising of listings on the Internet.

What if that were impossible.

Proposed Answered 3:

Currently Possible: Control over MLS Data

What if it were not?

How about Yahoo...Yahoo is an aggregator. Go to http://Yahoo.com and click on Real Estate. After you notice that Yahoo advertises Lending Tree and FSBO sites, type in your city or community and see to what web site you are directed.

Paradigm Shift Question 2: Opposite of Question 1 What is currently impossible to do in your business, and if it were possible, it would fundamentally change the way you do business?

Banks in real estate

Agents as employees

Employment and compensation structures based on work done and not a percentage of the sale price

As Joel Barker, in his book Future Edge, said..."When a paradigm shifts, everyone goes back to zero...your past success guarantees nothing when a paradigm shifts."

JB also said that most Paradigm Shifts are created by outsiders because they have nothing to lose.

I had the great priviledge of spending time with Billy Chee in the mid 1990s, actually discussing the industry and its future...over sushi, shrimp, and at a number of different gatherings over a 2 year period. He saw clearer than anyone at that time, I think, what was coming. The famous line from his Lion over the hill speech has never been more on target than it is today...For those of you who were not around or who may not remember it, it went something like:

"The lion is coming over the hill...and REALTORS are like a bunch of Chihuahuas arguing over a bone."

A good market hides problems...How are you preparing for the future? Get ready folks...we are just seing the tip of the iceberg.

Saul

The Real Estate Professionals and companies that survive the major changes taking place in this industry are those that can quantify what they do and how they earn their money. You must be able to differentiate yourself from the competition. Real Estate is a "Me Too" business and what you do to list and sell real estate is what REALTORS across the country do to list and sell...so, if you want to avoid declining commissions in a "Me Too" business, you must be able to differentiate in another way. In a "Me Too" business, you cannot differentiate based on the "big things" because everyone does the big things...so you must do many little things your competition does not do. In e-PRO we stress "It's the little things that make a difference."

Look at what consumers, not just real estate consumers, but all consumers are looking for today as they shop for products and services. These items can be referred to as "Consumer Demands" and when you look at what you do, how you do it, and how you market it, bring as many of these driving forces to bear as possible:

Speed - think of fast food and 24 film developing. The quicker you can take care of the administrative aspects of a purchase or sale, the more valuable you are.

Convenience - think of Seven Eleven stores. Also remember that people will often pay a premium for convenience. What do you do for the convenience and comfort of your clients?

Choice - the more alternatives initially, the more consumers like it, but then they narrow it down. Don't we all enjoy choice, from ice cream (31Flavors) to Coffee (Starbucks). What can you do to give your client more alternatives.

Value-added - people like to get MORE than they pay for, this is value added. Real Estate Professionals provide value added services everyday, but few take the time to re-enforce it to their clients. Have you ever cleaned or painted a house for a client after a sale? Helped them move something...or something like that, an extra, that WASN'T in the listing agreement but you did it anyway? That's "Value Added"

Discounts - If it is convenient enough, you will use a coupon. Lots of people look for discounts in everything they do. This doesn't mean you should offer discounts, but you must be aware that for many this is a "driving force" so play to your strengths in your marketing. Discounting is a legitimate way to compete and so if you do not want to compete by discounting, you must offer consumers something else of value.

Quality - Are you willing to pay more for quality? Many people are. What does quality mean in the real estate business? Maybe from a buyer's perspective it would be buying the home for less...and from the seller's prospective, selling the house for more.

Service - think of Nordstrom's which prides itself in its service. Most REALTORS say they provide service without defining it.

Information - this is the age of information! Consumers won't by a toaster or a microwave without first buying a copy of Consumer's Guide", let alone a piece of real estate. Make it quick (speed) and convenient for your clients to access to lots of (choice) information. Information can become knowledge and knowledge rightly applied is a differentiator.

Deliver the above at every available opportunity and your clients will not only love you, they will send you more business.

Saul

Question for Saul: Would it make sense to have your website linked to a major website, ie; ebay and can it be done?
Dale Murphy,C21 Christel Realty, Rockaway, NJ

Saul's note:

It certainly can be done...probably not in your best interest to do so. If you sell real estate in NJ and you send your web vistors to Yahoo...you will be sending them to Prudential, your competitor.

Go to http://Yahoo.com and click on Real Estate. Then type in Rockaway, NJ...and there you are on the Prudential website.

Saul

Every once in a while the question of incorporation comes up and there has been considerable input on the subject over the years.

A summary of the important aspects of the incorporation question would be:

1. Incorporation can offer tax benefits.
2. Incorporation has an initial and annual maintenance expense.
3. Corporations are separate entities and as such require a degree of "corporate housekeeping," of which failure to maintain may result in the loss of any liability protection which may be afforded by the corporation.
4. While many who incorporate use the benefits afforded them by incorporation, many do not use them which makes the incorporation a waste of money. I have seen this repeatedly in my tax practice over the years. Most of my tax clients were REALTORS.
5. Some states may have restrictions on payment of commissions, allowing commissions to be paid to only brokers or sales licensees, and typically, corporations may hold a broker but not a sales license.
6. Consult your tax professional and make careful consideration before taking on the responsibilities and benefits of incorporating.

My bottom line on it is that one must be willing and able (financially) to implement the benefits brought by incorporating, otherwise it is a waste of time, effort and money to incorporate. While incorporating is a benefit for many, most people I have seen attempt the "incorporate" strategy do not take advantage of the benefits allowed and the corporation becomes more of a burden to them than a benefit..

Saul Klein e-PRO/GRI
Certified Financial Planner (CFP)

The following are REALTOR comments from RealTalk over the years:

----------------------------------------------

3 March 2002

Benefits I see in my situation (your mileage may vary):

1.  I can now get group health insurance for my team.
2.  The corporation pays me a reasonable salary.  All money left at the end of the year is doled out to the corporate shareholders (only me).  I still must pay income tax on this distribution, but no double FICA/Medicare.  15% Tax savings here up to the first $84,000 made, then 2.9% savings for all over this amount. **Significant savings here**.
3.  I can now set up a corporate retirement plan for me and other employees.
4.  I do have some degree of a corporate shield against litigation.
5.  I can transfer wealth through giving shares to the kids or others.

Downsides:

1.  I must incorporate and pay a filing fee.
2.  Yearly corporate renewals.
3.  Slightly higher Tax prep fees (Personal return + corporate return) 4.  Increased recordkeeping burden (payroll taxes MUST be paid on time)

Notes to remember:

If you have rental properties, do not place them under the "S" corp (Use an partnership LLC) because if the home is transferred for personal use, it will trigger a taxable event and you'll have to pay capital gains, even though the home is not sold.  As an LLC, you can pull out assets and not cause a taxable event to occur by distributing appreciated property.

Bottom line is this:

Use a S corp when you have a business that is making probably $80,000-100,000/year or more and you want to shield some of the profit from payroll tax or FICA.  At this point, spending $1,000-2000 on the extra paperwork, you'll save $5000 in taxes, more or less.  Any income over the $80,000-100,000 mark means additional savings.

Use an LLC if you have appreciating properties (rental or investment) because of the ease of transferring the properties into and out of the LLC.

With an S corp, you'll probably pay much more in taxes when you sell a property than with an LLC.

Here's my disclaimer:  Call your attorney and CPA and sit down with them.
Make sure you use a CPA who is knowledgeable with real estate agent tax situations like mine is!  A good CPA will save you thousands each year.

Chip Aydlette, e-PRO

----------------------------

9 March 1998

There may be overriding tax reasons (and other reasons) why you may not wish to become a LLC or a corporation -- consider the cost of disability insurance on yourself, for instance -- the costs of being an LLC or corp. may dwarf the benefits.

Always remember your goals, look at the big picture and sit down with someone who knows when determining what type of entity your brokerage should be.  As my stepfather once wisely told me -- Never do anything solely for tax reasons. I didn't always heed his advice, but I have found that he was always correct..

- -rsr-

Ron "Don't let the tax tail wag the entity dog-- that goes for the liability tail, too" Rothenberg, CFP
-----------------------------

10 Mar 1998 20:06:04 -0600

Some of you guys are missing the point. Agents don't incorporate to avoid legal exposure- that's what E&O is for. Incorporation is to allow you major tax deductions on real expenses  self employed people cannot deduct without incorporating. Any state that does not allow payment to an agent's corporation needs their laws changed!!!
   
Thanks

Jo Barkley

---------------------------------

10 October 2001

As in most things, there are few absolutes. For us (my wife and I) a C-corp was the way to go because it allowed us to contribute to a defined benefit pension plan and shelter much more income than we would otherwise have been able to. This also allowed us to self-trustee the plan and we could inexpensively (plan costs) invest in trust deeds. Also, we could deduct 100% of our medical expenses. IMO, the best form of the business entity depends upon the needs of the owner and what is available. For example, until recently, California didn't allow single member LLC's. And, it's probably prudent to consult with your _professional_ advisors (attorney, accountant,etc.)

Fred Salzer

--------------------

08 Jan 2001

I have to agree with Randy and Tom. I incorporated in '94 and found myself tangled in a nightmare of never-ending forms and paperwork that cost me a fortune in time and money. I dissolved the corp. over a year ago and am still being barraged with "IRS spam"!! There may be benefits to some that would make it worthwhile, but it wasn't for me, especially because I don't carry a lot of monthly debts (no car payments ever again!!) that would benefit from a corp's ability to write them off. I'd think long and hard before doing it.

John King

-----------------

11 July 2001

I have long been a do it yourselfer for accounting. This year I needed help . My accountant also is asking me to consider incorporation. Surprisingly, it's not because of liability. It has to do with Self employment taxes. He says a lot of profits could be made not subject to SE taxes saving thousands per year.

Accounting fees might run $1000 per year. I'll be looking in to it.

Ed Tobey, REALTORR

Saul's note:

If you are employee of your corporation, it is true that you would have no self employment tax to pay, but the employer and employee payroll contributions are more than the SE tax and your corporation would have to pay BOTH.

Saul

------------------------

On top of that as a corporation you would also be paying Federal and State Unemployment taxes which have been running around 2.7% for us.  As self employed you do not pay those.

Tom Hanrahan

----------------------

11 July 2001

IMO, the form of business organization is dependent on the owner's (owners') needs. In our case, factors in choosing to incorporate (C-corp) were the ability to have a defined-benefit pension plan and a medical reimbursement plan. We are older and wanted to contribute the maximum amount (tax deferred) possible to retirement savings. We also wanted to expense all our medical costs. Our pension plan is self-trusteed and we invest primarily in trust deeds which, in our experience, is difficult, complex and expensive through plan trustees that will allow this investment. Most trustees of which we are aware will allow only investments in registered securities.

Fred Salzer

------------------

11 July 2001

I went through this awhile back.

>From what I learned, the form of your incorporation plays a large part
>in
what you can and cannot do and how it affects your taxes.  I was looking for liability protection,  the ability to have a retirement plan and simple taxes.  I have these within an LLC.  All funds "flow through" directly to us and corporate taxes are not applicable.  Since the funds flow through, we pay as we would otherwise as a sole proprietorship. No increase in my accountants fees. An S Corp is similar depending on what you do with it. The more complex the form of incorporation, the more it'll cost you at the accountants office.  LLC's were designed to be a simple way for a small business to achieve liablilty protection without being taxed as a corporation.  Talk to a lawyer about whats best for you.  It cost us $300 to form it plus another $100 for the state RE license for the corp, which hangs at the office.

Troy Dierling
------------------------

20 October 2001

Excess self employment tax, extra administrative fees and paper work, potential licensing issues, and the benefits sought, are often not funded.

Saul

-----------------

21 October 2001

I know that in PA the broker can only write a commission check to the name on the license and PA will not at this time license any entity except an individual.

Joseph M McGavin

------------------------

27 December 2001

I have researched the issue of S-Corp vs. LLC here in South Carolina and my CPA and attorney came up with the following points that applied in MY case... your situation may be different.

As a LLC (single agent) you are effectively becoming a "sole proprietor partnership."  If you are partnered with another agent, an LLC may be a good way to go.  If you are including in your LLC any rental property or investment property, when you sell it you do not have to pay taxes to take it out of the LLC.  It will be as if you owned it yourself.  As far as income taxes go, all commissions earned under the LLC are taxed as well as Full FICA and Medicare at 15.3%.  All income is treated as self-employment income. You must also never forget to re-up the LLC Charter with the South Carolina Sec'y of State Office each year.

As an S-Corp (single agent), You must pay yourself a "reasonable" salary.

So, in this example, I would save $8415.00 on my 2001 return...well worth the incorporation costs and added tax prep costs. If I had $200,000 in net commissions after expenses, I would save $23,715 in 2001! Convinced Now??

If you own investment/rental property and make over 75,000-100,000 per year, it benefits to have an LLC for the properties and a S-Corp for your real estate activities. If you aren't confused now, maybe you should sit for the CPA exam...my CPA had to explain it to me several times.

Chip Aydlette, e-PRO

--------------------
13 September 2002

Terry Crook Writes:
>>>>>Talk to your CPA/Tax Preparer. Every situation has subtle differences and your long-term objectives/goals will influence this decision. As we often say to consumers, consult/use a professional; much better than relying on your friends & nghbrs. This is an IMPORTANT decision, do not take the cheap/lowcost route to an answer!<<<<<

I couldn't disagree with you more strongly Terry.  I'm sure you would agree that there are competent as well as incompetent Surgeons, Doctors, Professors, Accountants, Lawyers, RealTalk contributors and yes, even Real Estate Agents.  Here, within the RealTalk community is a wealth of experience and information.  Some of it is worthless or incorrect, but most of it is enlightening, thought provoking, and useful in some way.

How fortunate we are that contributors to this forum DO NOT bill by the hour and are equipped to help many of us avoid the pitfalls associated with choosing new resources that DO bill by the hour and who MAY be negligent, ignorant, or both.

Again, I would invite those of you who have incorporated as S-corps, or L.L.C.'s, to throw in your 2 cents worth on the benefits, disadvantages, good or bad stories, etc. so as to enlighten those of us who are considering their options prior to retaining what we hope will be competent practitioners in the areas of law & accounting to assist with the transition towards incorporation.

Allan VanInwegen, GRI, e-PRO, MS
---------------------

14 September 2002

Allan VanInwegen wrote:
>Again, I would invite those of you who have incorporated as S-corps, or L.L.C.'s, to throw in your 2 cents worth on the benefits, disadvantages, good or bad stories, etc. so as to enlighten those of us who are considering their options prior to retaining what we hope will be competent practitioners in the areas of law & accounting to assist with the transition towards incorporation.

I have an "S" corporation.  The tax savings are EXTRAORDINARY.  Get a competent accountant to prepare your returns and DO the quarterly estimated returns and you'll save the penalties which can amount to quite a bit. I had to change accountants to get one that would cooperate with my plan.

The accountant that I had used for 10 years said that he didn't believe I needed to be incorporated (he wasn't).  I shopped for a year to get someone who would listen to me.  The attorney who help me decide the type of corporation charged a nominal fee for everything.  The key to significant savings is a good accountant.

This is really a good deal.  My only objection has been that I have to depreciate software development over some years instead of deducting the cost, but it's a good trade off since I saved enough in taxes in one year to pay for the software development three times over.  I love writing checks to my accountant.

Is this a great country, or what??

Lenn Harley
-----------------------------

14 September 2002

Be sure that your licensing statute permits you to incorporate.

In some Canadian jurisdictions that may not be possible and if Realtors try to assign their commissions to a corporation then the commission income must be reported by the individuals and not their corporations. It would be different if the local law or regulatory authority permits corporations to carry on the business of the professional. Some professional statutes also provide that - even if this is permissible for income tax purposes - the individual is still personally liable for professional activities.

Gather as much information as you can and then meet with a competent lawyer and tax advisor as part of your planning team.

Merv

Mervin Burgard, Q.C.

---------------------

14 September 2002

And, after following Merv's advice - make sure you have hired professionals that you plan on having "long-term" relationships with. If you are going to be around for a long time, so are they. You will never cease to have need of their expertise. It's not enough to ask them if they have experience. Like when folks as us for references, we need to seek out working partnerships that are with honorable folks.

There's not enough money in the world to pay for good advice - it's PRICELESS!, and you will need even more from that money-bag to un-dig yourself from having been given bad advice. Research! Research! Research!
and ask NetFriends like Merv and others on this forum, if they know anyone in your own area that they would work with, if they lived in your area.
Folks on this forum are a wealth of information and are wonderfully willing to share. Networking is everything!

Carolyne

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23 October 2002

> How about the taxes the corporation needs to pay? There must be some?And workmen's comp, or things like that, is anything required? When I incorporated I went with the Sub-Chapter S incorporation.  With that method you avoid double taxation.  All the corporation profit or loss carries straight over to your personal income.  And losses can be carried over from one year to the next.  Therefore the Social Security tax would be paid just like you do now with self-employment.  Plus, you get more deductions as a corporation.  The corporation can deduct the entire cost of paying for your health insurance.  There are probably other benefits, but I'm not a tax person......

Linda Grissette

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23 October 2002

From: "Ida Freimer" <ida@freimer.com>
> How about the taxes the corporation needs to pay? There must be some? And workmen's comp, or things like that, is anything required? I'm just (again) wondering if I should incorporate, and I'm not sure if the savings are really there. Actually it seems like it will cost me more. Is this very state dependent? Could someone who is just studying it and thus still remembers all the rules fill me in on the added costs? I didn't look much into it, so I don't know what I'm talking about here, but it appears to me that it's not a very expensive, but not free neither, and somewhat paperwork producing way to buy yourself a bit more limited liability.<

Ida:

As I said, I don't know too much about details, my wife is the brain behind the whole operation. From what I see, she gets something in the mail periodically from the State of Kansas, IRS, and whatever else, she tears off the coupon, writes something, includes a business check and that's about all I see. The trick is that she does it periodically as there is a deadline for paying all these taxes and this keeps her organized :o) I am glad I am not involved in the paperwork :o) I know that it took her a while to read through all the paperwork, fill it out once or twice, read all the notices she get in the mail in the name for the corporation, but if this saves us money (several thousand $$ per year) why not? You have to pay yourself an "average salary" for the job performed, with the average production of 4-6 homes per year (if that much :o) for an average agent nation wide I am OK.
I can go to MLS and prove that. Then you have an average agent company/broker split and you are down to this income. So, paying yourself $1,000-2,000 monthly in salary would be average depending on your market. The rest of that is "gravy" and you can take it in form of dividends.

You salary cannot be lower than the average salary - that is the whole purpose of incorporating - to pay as little SS and Medicare taxes :o) on the salary. Otherwise, if you go too low, it's a clear indication that you are in it for the taxes - which most people are :o)

A word of warning, if you are planning to buy a house and qualify for loan the year or next year when you incorporate, tax to a lender and your tax advisor about qualifying and how your incorporation will effect that.

Sincerely,

IGGY Dybal