Paying rent to an LLC company Vs Landlord

Member since 2019 · 258 posts · 35 votes

Hello,

A friend of mine owns rental real estate in his name (not LLC) but collects rent through an LLC, are there any tax advantages or any other advantages with this setup? I as a landlord directly collect rent from my tenants that goes into my bank account. I am curious about if there are any advantages about getting paid as a Landlord directly Vs LLC.

Thanks

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Greg ScottPro Member

Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes

Realistically, there is no tax benefit. Assuming the LLC is a flow-through entity, there would be no difference at all.

As an landlord you can create a property management agreement with your own LLC to do this. The main benefit is that the residents would see the LLC as the owner and might assume the owner is just a manager of the property management company.

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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
3y
Realistically, there is no tax benefit. Assuming the LLC is a flow-through entity, there would be no difference at all.
As an landlord you can create a property management agreement with your own LLC to do this. The main benefit is that the residents would see the LLC as the owner and might assume the owner is just a manager of the property management company.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
3y
Probably doing this just to keep his business activities separate from his peronsal finances - a very good idea.
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Jason Marino
Attorney · Member since 2022 · 160 posts · 186 votes
3y
Hi Kumar,
What your friend has is an Operating Company. There is a definite benefit from a legal perspective to setting up an entity like this as you can move some of the liability of interacting to this entity rather than putting that liabilty on the owner directly. Additionally, as stated above, this separate entity provides more anonymity for the owner as well. From a tax perspective, there is a potential advantage if certain thresholds of income are generated annually by the Operating Company, and the entity has elected S Corporation status.
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Kumar Gaurav
OP
Member since 2019 · 258 posts · 35 votes
3y
@Jason Marino
Thanks Jason. Say if the rental makes up to $50k an year are there any going to be any tax advantages? Can I somehow make it look like active income at least some part of it?
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