What are my options? Downfalls and Upsides?

2 Replies

Ok so here it is, I am looking at a Commercial property that has retail space along the first floor and apartments on the top floors, the building comes with a billboard on top along with a cell tower so there is extra income. My question is, could I set up an S Corp entity and put each property I buy from here on out as its own LLC but under the S Corp umbrella? What are the upsides and downfalls to doing this? I have spoken with Legalzoom and they cannot answer my questions all they want to do is sell me on buying their premium gold package. Before I pay for doing anything like that I need the answers because I don't want to do something now that will ruin me later if something were to go wrong. Also, the building is 99% rented right now the only space left is a 600 sq ft office space that was just recently vacated. The building looks really good, I have my realtor emailing me a confidentiality agreement to sign and then I can get the numbers on the property, so I know what kind of income I am looking at with this property. What are your thoughts, what should I be looking at that I am not seeing at this time?

First I would look at finding a source for legal advice other than Legalzoom.  Preferably, a local attorney familiar with real estate.  I am not attempting to give legal advice here, only giving my quick thoughts after reading your post.  Please consult an attorney for legal advice.

Your proposed business structure seems extremely complex, especially if you are just starting out. There are varying opinions on S-Corp versus LLC as well as whether or not each property should be in it's own LLC. That type of decision is best left to be discussed and determined through conversations with your attorney (not Legalzoom) and probably your CPA. If you don't have both of these that you communicate with regularly, that should be high on your priority list.

By having an S-Corp own/control the LLC's, you may have some negative tax implications as well. This is a conversation to have with your CPA. I personally use LLC's to own my real estate. I have one LLC that owns a substantial property all by itself, and another LLC that owns several properties. Property value and risk tolerance will play into your ultimate decision. I remember reading something recently that deemed S-Corps less favorable, but I don't know enough or remember enough about it to speak intelligently about it, other than to dig a little more to learn a little more.

Not sure that helps a heck of a lot, but it does give you a couple things to think about.

Not an attorney or accountant so I can't legally provide advice on business or tax structures.  Having said that, I would lean towards keeping things simple.  I don't see any advantages of an S-Corp owning multiple LLCs unless you have a very unique situation.  

I would like to talk to you on the rooftop wireless lease however.  I develop wireless towers for the big 4 carriers here in the Midwest and I have some avenues you may want to explore with your rooftop.  

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