LLC and the IRS

Seems irrelevant for REI. We file on Schedule E, not C. UNtil much later in the game, if ever, we do not have employees, do not collect/pay payroll taxes.

LLC is still the way to go for rental real estate.

I was just confused by the article and the IRS possibly changing the way a "Single" Entity is used as an LLC. I guess it was not clear if "single" meant one individual and "business" defining one or more individuals.

Thank you for the clarification.

JButcher

The obvious message from the link is to make sure you check the appropriate box on the forms.

A reason for choosing a Limited Partnership instead of an LLC could be because of the longer history of case law for L.P.s. Another reason may be for anonymity. An LLC, while protecting the assets, does not have any provision for concealing the owners' identities. An L.P. can do this by having a nominee officer sign for the general partner of the L.P. so the public records need not divulge the true "owners." (The limited partners have no operational authority; this is done in the name of a general partner.) It may seem an unnecessary step, and some people believe that if you don't try to do underhanded things no one will sue you. But anyone can be sued, especially in rental real estate, even if there's no valid cause. Law suits can hamper investment activities if principals' names are known. Another advantage of an L.P. is that some states require annual renewal fees for LLCs but not L.P.s, although in some states it may be the other way around.

Either form of ownership, as well as a corporation or even a living trust, provides a huge benefit by removing the assets from the probate estate, thus saving time AND money in case of a death. A beginning investor doesn't have to make these decisions at the start of an investment career, but choices need to be considered as assets and activities increase.

cactusbob

I am confused about the whole LLC thing. I spoke with someone from The Tax Club last night & he spoke mostly about an S Corporation.(I really don't have the money for that either) He explained about the tax advantages, which I understand (somewhat)but aren't there tax deductions with an LLC as well? I'm new and I'm processing SO MUCH information right now, this just added to my confusion! Shouldn't I be setting up an LLC? Zoomlegal says you can check an option to be taxed as a corporation...more confusion! Please, can you clarify this for me? I appreciate any insight you can give. Thanks!
Dawn

Could someone please address my question above? I would like to know what the advantage to "checking the tax as a corporation" box would be. Thanks much!
Dawn

Thanks for the information,it's appreciated.
I guess I should find a CPA and ask for more personal advice and see what will work for me, right? I really don't want to get over my head with corporate paperwork. This has kinda hung me up. I just want to get out there and get my first deal under my belt! Wish me luck!
Dawn

I went ahead and filed my LLC with LegalZoom last week so I should get everything in a few weeks. I spoke with a couple CPA's and just went for it.
I didn't want to dwell on it any longer. I am still looking for that first deal and I WILL find it! Thanks for the encouragement!
Dawn

I found the best route is to talk to your CPA or tax person BEFORE you set up a business. Ours told us since we just purchased our first rental prop to set up an LLC and file as a partnership at tax time. It is only my husband and myself in the LLC with me being a member and him a partner. This protects us and is great for making tax time easy.

As for a new thing they have only available in some states is the LLC series. I was just informed by our attorney about this option. If you have many properties and are putting each into an LLC than you can do it all under one, an LLC series. This is set up especially for people who have real estate to rent. Check with your local state to see if available. Of the three I know of so far it's: California, New York and Iowa...and there are only a handful but if you have your property in one of these states you might find it beneficial....Best, Angie

I actually set it up with my hubby and I as members & pass through entity.
We don't have any properties yet but I'm really working hard to get my first deal! I didn't see the LLC series on my state websited when I was researching but I beleive there is a way to do this in WI. I will talk to my CPA and find out more. Thanks for the advice!
Dawn

Good Afternoon Dawn!

I'm responding to your comments surrounding the level of confusion that you're experiencing while starting an LLC. I STRONGLY suggest that you meet with your accountant or tax professional to assist you with this decision.

I recently started my own LLC (after meeting with my accountant) and due to the nature of my business, she suggested that I establish an "S"-Corp due to the flexibility that it has as it relates to extracting money out of the business & from a tax standpoint.

Once again, I STRONGLY RECOMMEND that you meet with your tax professional to assist you with this decision. It seems overwhelming at first, but once you meet with him/her it will make ALOT more sense!

God Bless!!!

Welcome to the DG family! I appreciate your recommendations. The CPA's I talked to never suggested the S-Corp, even knowing what we will be doing. I haven't yet received paper but I was told I could change this at any time. Is this correct? With all the meetings and minutes I thought it easier as I am just starting out as well. I think I will be calling on them again...
Thanks much Troy!

Dawn