LLC vs. Corporation, book keeping
Hello,
Any recommendations on who I can chat with regarding creating LLC for out of state rental property I purchased. Benefits of LLC, s-corp, etc. Also how I can prep for next years taxes. Thank you
Hi Ruben,
It's nice to meet you!
Congrats on growing your real estate portfolio. I have some information regarding LLC's, asset protection, and how this can affect you as you grow your portfolio.
At Carter Street Financial Solutions, I work with real estate investors to help them create more generational wealth by making bookkeeping easy so you're ready to maximize tax benefits. And I say that to say this, I work on the offensive side on how to save money, have real-time data with your finances, create financial plans, and minimize tax. I'm not an attorney so I can't help you on the defensive side to guide you in the direction of how to protect your assets.
I'm not sure how many rental properties you have right now, but I think you'll find great benefit from listening to Bigger Pockets Podcast episode 595 "How to Layer Legal Protection So Lawsuits Won't Touch Your Wealth w/ Brian Bradley, Esq."
And if you're interested in speaking with an attorney in my network I'd be happy to connect you.
Talk soon,
Jori
This is really a CPA/Attorney question as everyone's financial situation is different. Typically I see investors do LLCs. In California, if you put your property in an LLC, then it automatically becomes subject to Statewide Rent Control.
In terms of prepping for next year, good records is key to be able to determine the write-offs.
+1 on asking a CPA and an asset protection attorney. really.
That said...I'm highly skeptical you'd want to put rental properties in an LLC that opt'd to be taxed as an s-corp. That only really makes sense for active businesses with enough profit to pay the owners and still declare a dividend, hence avoiding self-employment (or the equivalent) tax on part of the profits. The most common is a domestic (e.g. in the same state as the property) LLC, taxed as a disregarded entity or partnership (the default). But, note that doing so doesn't change the (federal at least. some states like CA do wonky and expensive things wrt LLCs) tax handling for standard long term rental properties. It's mostly an asset protection thing.