Chapter 3 · Make It Official
Make it official.
Secure your business structure, banking, and insurance to protect your assets while you hunt for your first deal. Most steps take one weekend.
1–2 wks
mostly waiting on offices
0/6
steps done
The order that saves you money
Each step opens a short how-to, with the free way first. Ticks save to your business plan.
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Sole proprietor: it all sits in one pile.
Business bank account
Equipment and supplies
Your savings
Your home
Your personal car
Step 2 · Structure
Most trade businesses climb the same steps: start as a sole proprietor, form an LLC once there's something to protect, and add an S-corp election when profit is high enough. Answer four questions and the marker moves to your step.
Starting alone or with a partner?
With a partner, the steps switch to the partner versions.
Anything to protect, or anyone helping you?
A home, savings or a paid-off car, or helpers whose mistakes with a customer become yours.
Expected yearly profit
$60,000
Past about $62,000, an S-corp election starts saving tax. Moves the slider below too.
Raising money from investors?
Investors usually want a corporation. Most trade businesses never do this.
Where most trade businesses start
- Start hereSole proprietorStarting out
In house flipping: Your first jobs, with tools you already own.
- Protects your things
- No. You and the business are the same.
- To start
- About $0, plus a local name filing (DBA) if you use a brand name
- Each year
- Your local license
- Taxes
- About $8,478 self-employment tax at $60,000 profit
- LLCSomething to protect
- LLC + S-corp electionProfit past about $62,000
Answer the questions and the marker moves to your step.
Before you file: Licensed trades: some state boards set rules for the business itself, like a licensed person on record (a qualifier) or an extra bond for an LLC. Check your state's licensing board before you file.
Tax figures use 2026 federal rates; income tax is left out because it's about the same either way.
Step 2 · Why it matters
The claim is bigger than your insurance pays. Switch the structure and see what's on the table.
A claim a house flipping business could face
A job goes wrong and the owner claims the damage to their home, plus the cost of fixing it.
Your business is a
5 of 5
of the things you own are within reach
Everything you own is on the table.
A sole proprietor and the business are the same person in court.
Insurance pays first in every one of these. The structure decides what happens when the claim is bigger than the policy.
Taxes don't come as one bill in April.
Taxes
Business taxes come in layers, not one bill in April. Two questions and your structure light up yours.
Your structure
Sole proprietor
Will you sell products too, not just services?
Will anyone work for you this year?
2 of 6
tax layers apply to you, 2 to confirm
Income tax
The IRS and your state
Profit passes through to your personal return. Pay it in four quarterly estimates, not once in April.
AppliesSelf-employment tax
The IRS
15.3% on most of your profit, for Social Security and Medicare. Paid with your quarterly estimates.
AppliesSales and use tax
Your state's tax agency
Some states tax house flipping services and some don't. We're confirming your state.
CheckPayroll taxes
The IRS and your state payroll agency
Starts the day anyone is on payroll, including you as an S-corp owner.
Not for youLocal business tax
Your city or county
Some cities and counties tax business income or gross receipts. Ask yours.
CheckState franchise or annual tax
Your state
Only for LLCs and corporations.
Not for youEach one lands on your calendar below with its due dates.
Who handles your taxes
Books all year, then either you or a pro files. With your answers, you can likely file it yourself.
Keep the books all year
Everyone, from the first paid job
Every tax form starts from your income and expenses. Software that pulls in your business bank account turns April into an export instead of a shoebox.
File it yourself
Fits youOne owner, no employees, no S-corp
A sole proprietor or single-owner LLC files the business on the personal return (Schedule C). Self-employed tax software walks you through it, including deductions.
Hand it to a pro
S-corp, employees, sales tax or more than one state
A separate business return, payroll filings and the S-corp salary question are where a CPA or enrolled agent pays for themselves. Ask what they charge before you start.
We may earn a commission from partner links. It never changes the advice, and the free way is listed first.
Step 2 · Taxes
Three things decide it: your profit, the salary you'd have to pay yourself, and your tax bracket. Set all three and see every dollar that moves.
The salary is the catch. The IRS expects you to pay yourself what you'd pay someone else to do house flipping work. The better your trade pays, the higher that salary, and the later an S-corp starts to save.
Your income-tax bracket
Your federal bracket, from last year's return or your tax software. It changes what the deductions are worth.
Self-employment tax on all profit, less what its deductions save you
Payroll tax on a $35,000 salary, unemployment tax, about $1,500 for payroll and tax prep
Not worth it yet
costs $210 a year
The extra payroll, filing and the smaller QBI deduction cost more than you would save. Stay a plain LLC for now.
Starts paying off near $62,000 profit, at this salary and bracket
An estimate with 2026 federal rates (15.3%; Social Security up to $184,500), the 20% QBI deduction, and a typical $300 of state unemployment tax. Income tax that is the same either way is left out.
Step 4 · Bank account
One account for the business. Nothing personal on it.
It feels harmless to grab groceries on the business card. It's the most common way owners lose their LLC protection, and it turns tax time into a weekend of sorting.
Put a personal charge on the business card:
Your LLC shield
Strong
At tax time
0 charges
to find, pull out and explain
Clean books, real protection
Habit 1
Money in
Every customer payment lands in the business account. Cash and tips too.
Habit 2
Money out
Business costs only, on the business card. Nothing personal, not even once "just this time".
Habit 3
Paying yourself
Move money to your personal account as a transfer, called an owner’s draw. Then spend it however you like.
The gray ones in house flipping
Groceries are easy. These are the charges owners argue with themselves about.
The vehicle you also drive home
Only the business miles count. Keep a mileage log from the first job.
Your phone
Only the business share counts. Pick a fair split and keep using it.
Work clothes
Uniforms and safety gear count. Everyday clothes you happen to wear to jobs do not.
Tools you owned before
They can become business property. Write down what they were worth when you started.
Slipped once? Pay the business back from your personal account and note what it was for. One mistake fixed isn't a broken shield. A habit is.
Make it automatic
Connect the business account to bookkeeping software and every charge is sorted as it happens, so a slip shows up the same week.
Step 6 · Insurance
Pick what happens and what you carry. See who pays.
Two more you'll need when they apply
Commercial auto
If you drive to jobs, personal auto insurance often excludes business use. A commercial policy, or a business-use add-on, covers the drive and the gear in the vehicle.
Workers' comp
Required in most states once you hire, in some from the first employee. It pays for on-the-job injuries so a hurt helper doesn’t become a lawsuit.
Step 5 · Licenses
There's rarely just one business license. Here's what house flipping work needs from the federal government, your state, and your city or county.
Level 1
Federal
U.S. agencies
Usually none for house flipping
Federal licenses cover specific work: regulated chemicals, vehicles for hire, aviation and the like. Your EIN is your main federal step.
Level 2
State
Your state
Trade or professional license
Some states license house flipping work and some don't. Check your state's licensing board.
Seller's permit
If your work or products are taxable. See which taxes apply to you above.
Level 3
City and county
Where you work
City or county business license
Nearly every city or county requires one. Ask the clerk where you work.
Permits
You must pull permits for almost all major interior/exterior work. Work without them makes the property illegal to sell later.
Contractor Licensing
Do not perform licensed work (electrical, HVAC, plumbing) yourself unless you hold the specific license. Hire pros.
Zoning
Confirm the property is zoned for your intended use (e.g., residential flipping).
Disclosures
Laws vary by state; you have legal obligations to disclose defects in a property you are selling. Consult a local real estate attorney.
Working from home?
Most cities want a home occupation permit: limits on customer traffic, signs, parking and storage.
Staying official
Missed deadlines are where the penalties come from. Here's every date that applies to you, from your answers above.
Nov 26
Dec
Jan 27
1 due
Feb
Mar
Apr
2 due
May
Jun
1 due
Jul
Aug
Sep
1 due
Oct
- Jan 15, 2027Quarterly estimated tax, fourth paymentIRS (Form 1040-ES), and your state if it has income tax
- Apr 15, 2027Quarterly estimated tax, first paymentIRS (Form 1040-ES), and your state if it has income tax
- Apr 15, 2027Federal tax return, with your business on Schedule CIRS
- Jun 15, 2027Quarterly estimated tax, second paymentIRS (Form 1040-ES), and your state if it has income tax
- Sep 15, 2027Quarterly estimated tax, third paymentIRS (Form 1040-ES), and your state if it has income tax
Dates to find
City business license renewal
Usually yearly. The date is on your license. Your city or county.
Insurance renewal
A year after you buy. Tick insurance in your checklist and it lands here. Your insurer.
Trade license renewal and continuing education
The board sets the cycle and the hours. The date is on your license. Your state's licensing board.
A date that falls on a weekend or holiday moves to the next business day. The calendar file reminds you a week before each one.
Common Pitfalls
Mistakes to avoid
Don't get into legal trouble before you even buy a house.
1Mixing personal and business funds
It invalidates your LLC protection and makes tax prep a nightmare.
Instead: Open a dedicated business account and use it only for business expenses.
2Doing work without permits
It creates massive 'cloud on title' issues when you try to sell the finished house.
Instead: Always check with the local building department before picking up a sledgehammer.
3Using generic, free contracts
Real estate contracts are highly specific to state law.
Instead: Spend the money on a local real estate attorney to draft your standard Purchase and Sale Agreement.
Your business plan, section 2
Making it official
- Structure: not chosen yet
- Where you work: not set
- Steps done: 0 of 6
This is general education, not legal or tax advice. For your situation, talk to an attorney or accountant.
Find a proQuestion 1 of 3
What is the primary reason to form an LLC for your house flipping business?
Next · Chapter 4
Work Smarter
Now that you are legally official, Chapter 4 focuses on the most critical part of flipping: finding and evaluating deals that make financial sense.
From here on, the guide opens with a free account. Your plan and everything you picked come with you.