Real Estate Investor · Bedford, NH · Member since 2008 · 45 posts · 3 votes
My brother and I own one rental unit that is free and clear. It is a fully rented two family home and has little improvement costs and a solid cash flow.
We are looking to find #2
Both of us are concerned with risk. I think we would like to create some entity to use for our next purchase and ideally place the existing property into.
Any suggestions? LLC? S Corp? C Corp?. Ideally the structure will be strong enough to support a much larger business. We are both thinking long term.
The best entity to "hold" property is a LLC. Stay away from the S corp as you will incurr self-employemnt taxes. The LLC is a "pass through" entity and is great for holding rental properties.
Keep in mind that I am not an attorney so you should seek legal advice for confirmation.
C Corp just more of an extreme then as well? What if we wanted to hold shares in the corp, taking dividends as income, not salary? Or even sell shares as a long term exit strategy?
I am not sure one way or the other in regards to the C-corp, however, I do know that you are rquired to make paychecks, not all income can be derived from dividends. The dividends do provide for a lower tax rate of course, but holding one or two or even 20 properties for long-term only need an LLC. It offers easy set-up, low maintenance, low costs, pass through accounting, liability protection (one way), and much more. There is really no need for complicated business structures for a landlording business, it is not that complicated.