Operating under an LLC which is under an S-Corp

2 Replies

I have read where other REI's have operated under an LLC which is umbrellaed under an S-Corp for tax purposes. I am in the process of pulling my RE properties under a "business" entity to separate my personal business from my "Income" business. Any advise or insight into this strategy?

Gerald Marshall

    Gerald, 

    Im not 100% clear on your personal business and real estate business structure so take my advice with a grain of salt. You would want to consider using an S-Corp if: 1) you're disqualified from being considered a real estate professional because you have another job and 2) you have sufficient real estate income that is not passive in nature. A CPA can explain to you when the hassle of an S-Corp might start to make sense, but my take is: if you are making enough money from non passive activities that you can pay yourself a reasonable salary and still have money left over to distribute, do it. You'll save on self employment tax on the surplus distribution. 

    Chris, thanks for your reply.  With reference to separating my person business, im referring to my house hold expenses.  I am not a real estate professional, but soon will be.  An injury has caused a disability which will give me a small income, but not enough to live on.  I am in the beginning of putting my business model in place, which includes mortgaging my current properties to access capital for future purchases.  My goal is to purchase 2 mil. in properties in the next 18 months.  Except for my disability, all of my income will be from Passive Income, since I plan to continue with what I know, which is Landlording. 

    Gerald Marshall

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