Rental properties, LLCs, & S-Corps
I have rental properties in KS & TX and I use property management companies to run them, but I'm "active" since I materially participate and often make decisions regarding tenants, repairs, HOA notices, and major repairs since I research those and hire contractors myself. Today all profits & losses simply hit my Schedule E tax form. However, I'm considering setting up a LLC as a holding company with tax status of an S-Corporation, and then two subsidiary LLCs to hold my KS & TX properties which will not be S-corp status, just pass-through up to the holding company. I know the LLCs will provide a layer of protection in addition to my umbrella insurance policy, which is great. However, my biggest question is, if I do this, am I able to pay myself a "reasonable" salary as a W2 employee within my holding company? If so, I'd also like to open a Solo401k so I can invest my salary into that retirement account. Can anyone tell me if I'm allowed to do this since my status is "active" or would I need to be a "professional" status? In case it's helpful, I'm also a W2 employee with typical day job where I also have a 401k with that company.
Most Popular Reply
Oh my god. Please talk to a qualified CPA before you do this. I just had shivers going up and down my spine reading this with the sheer number of pitfalls in your plan.