Investor · Spring Branch, TX · Member since 2017 · 14 posts · 10 votes
I have found several posts that address the pros and cons of an LLC versus a Land Trust regarding the type of protection they provide. That is not my concern because I believe that if a tenant is injured on my property and that injury is a result of my actions or negligence an good attorney will find a way to go after me and not just the business entity. And therefore carry both property insurance as well as a general umbrella policy. That being said, I am still interested in the tax benefits of structuring my buy and hold rental business in the appropriate business entity. My question is simply are there any tax benefits to holding my properties in an LLC vice holding them in my name? My properties are all out of state, so flying to inspect properties is a business expense. That is straight forward enough, but what about other expenses, i.e. a company car? I will be driving out of state for business as often as flying, if not more, can an LLC, or other business entity, buy a car and deduct it as a business expense? Any thoughts and suggestions are welcome.
Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
9y
I'd strongly suggest you meet with a CPA and go over these questions and scenarios in order to receive the best advice. There's way too much info to get into any detail on a forum post, but there are different elections an LLC can take on how they get taxed and this is one option you can take to save on taxes. You can elect to file as an S-Corp and that's something a professional can better explain than I. If your LLC is as a sole-proprietorship, then you will have pass-through taxation which means no taxes will be paid at the business level.
Investor · Flower Mound, TX · Member since 2017 · 182 posts · 198 votes
9y
Based on the limited information (buy and hold goal) the quickest reasonable answer is going to be LLC without S election. Sub S corps are better for actively managed operating businesses where you can allocate some revenue between payroll taxable compensation and business profit (no payroll tax). LLC or trust basically don't exist for tax purposes, but are best for "passive" investments like RE. There are no different deductions that you can take through LLC or trust or generally even Sub S corp, that you can't also take as a sole proprietorship, or partner. They all flow to your personal return, generally on Sched E or Sched C. Sub S is terrible for capital gains treatment and flexibility in passive investing so very few use it to buy and hold. Finally the regular C corp is the worst for small investors with double taxation and high cap gains rates.