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Tax, SDIRAs & Cost Segregation

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Tim Hawkins
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New LLC and EIN vs TIN questions... literally no idea!!!

Tim Hawkins
Posted Jan 5 2024, 09:44

Hello, 

I'm not sure if I've bitten off more than I needed to, but the more answers I get the more questions arise... My situation is this: My wife and I own a single rental property (at this point). All of the associated loans and banking for the property are under our personnel names as of now. I readily admit I am under-educated on the minutia of LLC'ing and recently created an LLC with the state of MT at the end of December. My intent is to keep the financial/legal business side of the rental separate from our personnel. I alone am the registered agent for the LLC and my wife's name is not on any of the state LLC forms. My bank says I need to speak to my accountant, who then says I need to speak with legal for some of my questions. I have reached out to an attorney (no call back yet) for my real estate questions and estate planning moving forward.

But for the collective brain trust here, these are my questions:

1. With my name being the only one on the LLC paperwork but all the loan and banking being in both our names, should my wife be listed as a registered agent as well?

2. If so, regarding the IRS, would that then make the LLC more than a single member LLC, and would we still be able to be considered a disregarded entity?

3. Since there are no "employees" in the LLC, my understanding is that no EIN in needed, only a TIN, which would be my/our SS#'s. Is this correct?

4. I am looking at opening up a business account in the LLC's name, the bank says I need an EIN, but the IRS says I only need a TIN (my SS#) since there are no employees.

5. Lastly, if the loans are in our personal names but everything else is done/moved under the LLC name, do I need to look at refinancing the property under/into the LLC, or is it still beneficial to have the LLC with the loans under our personal names?

6. Have I unnecessarily over-complicated things for a single rental by LLC'ing?

I hope this all makes sense. Thank you to anyone willing to take the time and be brave enough to answer my rambling under-educated questions.

Tim

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Steve Vaughan#1 Personal Finance Contributor
  • Rental Property Investor
  • East Wenatchee, WA
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Steve Vaughan#1 Personal Finance Contributor
  • Rental Property Investor
  • East Wenatchee, WA
Replied Jan 5 2024, 10:18
Quote from @Tim Hawkins:

Hello, 

I'm not sure if I've bitten off more than I needed to, but the more answers I get the more questions arise... My situation is this: My wife and I own a single rental property (at this point). All of the associated loans and banking for the property are under our personnel names as of now. I readily admit I am under-educated on the minutia of LLC'ing and recently created an LLC with the state of MT at the end of December. My intent is to keep the financial/legal business side of the rental separate from our personnel. I alone am the registered agent for the LLC and my wife's name is not on any of the state LLC forms. My bank says I need to speak to my accountant, who then says I need to speak with legal for some of my questions. I have reached out to an attorney (no call back yet) for my real estate questions and estate planning moving forward.

But for the collective brain trust here, these are my questions:

1. With my name being the only one on the LLC paperwork but all the loan and banking being in both our names, should my wife be listed as a registered agent as well?

2. If so, regarding the IRS, would that then make the LLC more than a single member LLC, and would we still be able to be considered a disregarded entity?

3. Since there are no "employees" in the LLC, my understanding is that no EIN in needed, only a TIN, which would be my/our SS#'s. Is this correct?

4. I am looking at opening up a business account in the LLC's name, the bank says I need an EIN, but the IRS says I only need a TIN (my SS#) since there are no employees.

5. Lastly, if the loans are in our personal names but everything else is done/moved under the LLC name, do I need to look at refinancing the property under/into the LLC, or is it still beneficial to have the LLC with the loans under our personal names?

6. Have I unnecessarily over-complicated things for a single rental by LLC'ing?

I hope this all makes sense. Thank you to anyone willing to take the time and be brave enough to answer my rambling under-educated questions.

Tim

There are actually more good reasons not to put a residential small rental into an LLC than reasons to do it.
There won't be anonymity.   Your weak quitclaim deed will be in the title chain.  Then your title insurance and hazard insurance are at risk for not covering you since you and your wife no longer own it. 

Yes, if you want to do this and subject yourself to commercial loans and/or DOS violations when you change your landlord insurance, have your wife be a member to maintain title integrity.

Whether the IRS considers a married couple a SMLLC or not depends if MT is a community property state or not. Google community property states.  I think there are 39 of them. 

I hold commercial properties only in LLCs and we use EINs.  EINs are generated by the IRS and are not your ss#.  Your ss# would be used in a dba situation only as far as I know but I'm not a lawyer. 

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Carini Rochester
  • Investor
  • Rochester, NY
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Carini Rochester
  • Investor
  • Rochester, NY
Replied Jan 5 2024, 13:19

Super easy to get a EIN. The IRS website generates a number almost instantly (as I recall) and it's free. And it doesn't matter if you employ anyone or not. 

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Tom Morrissey
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Tom Morrissey
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  • Odessa, FL
Replied Jan 6 2024, 07:33

@Tim Hawkins Talk to a lawyer :) though my wife and I did the same in recent past and this is what we learned.  (and everything Steve V. mentioned above it true and accurate; hopefully my answers will help to clarify)

1. With my name being the only one on the LLC paperwork but all the loan and banking being in both our names, should my wife be listed as a registered agent as well?

Being the RA doesn't convey any ownership or the LLC. It only indicates the primary contact for the LLC (since some LLCs are created anonymously). In fact, I believe there is only a single RA on any LLC.

You might mean that you want to put her as a Member (Owner) of the LLC (which is different than the RA). Steve's answer is correct about how the LLC might treat spouses who each own half of an LLC.

What we did was put our family trust as the sole member of the LLC, thus it is a single entity LLC (thus a disregarded LLC), and both my wife and I are the trustees of the family trust, so we share ownership. We it all eventually flows onto our joint Schedule E. Whew!

2. If so, regarding the IRS, would that then make the LLC more than a single member LLC, and would we still be able to be considered a disregarded entity?

See previous comment.

3. Since there are no "employees" in the LLC, my understanding is that no EIN in needed, only a TIN, which would be my/our SS#'s. Is this correct?

We have an EIN for our disregarded LLC.

4. I am looking at opening up a business account in the LLC's name, the bank says I need an EIN, but the IRS says I only need a TIN (my SS#) since there are no employees.

We use the LLC's EIN and avoid using our SS#s.

5. Lastly, if the loans are in our personal names but everything else is done/moved under the LLC name, do I need to look at refinancing the property under/into the LLC, or is it still beneficial to have the LLC with the loans under our personal names?

We have kept our loan in our personal name, and the bank is good with that. They knew it was an investment purchase. The details of what we did are: we actually put the property into a land trust which avoids the loan-call and avoids property transfer taxes. And our LLC is the beneficiary of the land trust (which has the family trust as the beneficiary). Took me a while to understand this structure, but we are good to add more properties via individual land trusts which will have the LLC as the beneficiary. Whew!

6. Have I unnecessarily over-complicated things for a single rental by LLC'ing?

Yes.  We did too.  But we are planning to add more properties to our holdings in the coming year, so we're set for growth.