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Is this the right tax set up?

triple J

New Contributor
Aug 8, 2007
48
13
21
Utica, NY
I've been getting a lot of requests from landlords in my area to rent apartments for them, so I've decided to start a property rental company. This will also include some management on certain properties. I thought it would be best to set up an LLC but not sure if it should be a single member LLC or multi member taxed as an S corp or anyother option I don't know about. Any suggestions?

I also have a seperate LLC for my and my husband's rental properties. Additionally, we have a friend that will be helping us in the apartment rental business as well as helping in our properties we own. I was thinking that it would be a good idea if he started an LLC and both of our businesses could pay his LLC. We're all leaning towards this instead of making him an employee of both businesses. Do you think that is a good idea?
 

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Diane Kennedy

Bronze Contributor
Aug 31, 2007
795
209
49
I've been getting a lot of requests from landlords in my area to rent apartments for them, so I've decided to start a property rental company. This will also include some management on certain properties. I thought it would be best to set up an LLC but not sure if it should be a single member LLC or multi member taxed as an S corp or anyother option I don't know about. Any suggestions?

I also have a seperate LLC for my and my husband's rental properties. Additionally, we have a friend that will be helping us in the apartment rental business as well as helping in our properties we own. I was thinking that it would be a good idea if he started an LLC and both of our businesses could pay his LLC. We're all leaning towards this instead of making him an employee of both businesses. Do you think that is a good idea?
A couple of points: (1) The prop management business is a BUSINESS. That means you need to hold it in a separate entity and use a business entity (not real estate or investment type entity). That means you want an S Corp or C Corp or LLC taxed as an S Corp or a C Corp.

(2) Rental properties are investments - do great in an LLC with default structure. Hold them separate from the business.

(3) You can't pay salary to an owner of an LLC in the default tax structure.

Go back and read Business Structure Basics in this section of the forum (Taxes/Legal/etc). I think the foundational knowledge there will help you with your plan.
 

Allthingznew

Contributor
Aug 26, 2007
416
56
25
You may already know and have one, but you may need a license to manage other peoples property if you aren't actually on their payroll.
 
OP
OP
T

triple J

New Contributor
Aug 8, 2007
48
13
21
Utica, NY
A couple of points: (1) The prop management business is a BUSINESS. That means you need to hold it in a separate entity and use a business entity (not real estate or investment type entity). That means you want an S Corp or C Corp or LLC taxed as an S Corp or a C Corp.
OK. I was thinking that my hubby and I start the LLC and I own 51% (woman owned) and he owns 49% and have it taxed as an S corp.

(2) Rental properties are investments - do great in an LLC with default structure. Hold them separate from the business
Yes. My properties will be separate from the rental biz. I'm not sure what default structure is though. I'll look into that.

(3) You can't pay salary to an owner of an LLC in the default tax structure.
So if my LLC that holds my own properties is a default LLC (not sure yet if it is or is not), I cannot pay my friend's LLC for services provided by his LLC?

Go back and read Business Structure Basics in this section of the forum (Taxes/Legal/etc). I think the foundational knowledge there will help you with your plan.
I will do that! I'm also reading your free book (thank you btw) and am reading your operations guide.

Thanks for all you do Diane.
 
OP
OP
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triple J

New Contributor
Aug 8, 2007
48
13
21
Utica, NY
You may already know and have one, but you may need a license to manage other peoples property if you aren't actually on their payroll.
Yes. I will have my RE Brokers license by March and there is another license required by NY which will all be fulfilled before we officially launch. Good to point it out though.
 

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