Should property manager pay me through my SSN or through a pass-through LLC EIN?

Question

Hi I'm hoping for some advice on this one. My accountant has this in their inbox as well. I have two LTRs out of state that are managed by a local, fantastic property management company. To date, they've been sending me rent proceeds right to my personal bank account, in my personal name. The houses are in my name, for now anyway. My question is...

Should I give the property manager the EIN of an LLC that I already have and already use for a local LTR? I manage the local one myself. Doing so would increase revenue to my property management LLC but likely has some downsides I'm not aware of yet. Thoughts? Thanks all!

Sean O'Keefe · Answer

@Warren Barton PM should pay the person / entity that holds title to the property and is listed on lease.

Warren Barton · Answer

@Sean O'Keefe This is clear, thank you! Keeping things as they are for now. Much appreciated.

Jason Malabute · Answer

I wouldn’t recommend having the property manager pay your personal property into the EIN of an LLC that doesn’t own the property. Mixing revenue across different entities can make accounting and taxes difficult. It may also cause issues if the LLC has partners not involved in the personally owned property.

Clint Galliano · Answer

Not an attorney, nor a CPA, and I don't play one on the internet, BUT, things to consider if you would want to run revenue through your LLC...The LLC would need to be tied to the property in some way, either as the owner or manager. AND, if the LTRs are out of state, you will need to register your LLC as a foreign entity in the state you are operating in if you are being paid from that state. That amount varies from state to state. For tax purposes, all LLC earnings pass through to your personal tax returns, so there is no practical tax benefit. If your goal is to grow your LLC, consider arranging all of your properties under an agreement with your LLC to manage them & take all of the legal steps to ensure that the structure is correct. this may involve creating LLCs in the state(s) your LTRs are in to own the property and your PM LLC managing those properties, so that you don't have a concentration of all of your portfolio in one entity. The caveat is that it is dependent on the value of the properties and your tolerance for risk. Ideally, you don't want to concentrate all of your properties into a single entity in the event of a lawsuit against one because it exposes the rest of the properties to that lawsuit. Ultimately, it's a lot of hoops to jump through and the cost may not necessarily be aligned with your plans. In summary, it may be better to keep getting paid through your SS, unless you plan to scale your portfolio dramatically.

Ashish Acharya · Answer

@Warren Barton  Having your property manager pay you through your LLC EIN offers better liability protection by separating personal and business assets.

For tax, you should use the EIN.

Adam Bartomeo · Answer

It would depend on your financial situation but most of the time you should have it paid through the LLC as you should be able to get more tax benefits and legal protection.

Drew Sygit · Answer

@Warren Barton a PMC should pay the legal owner of the property OR that owner's lega representative.

If the properties are in your personal name, to have the PMC pay your LLC, you'd need to name your LLC as your legal representative and provide acceptable documentation to the PMC directing them to pay your LLC.

They'd then 1099 your LLC via its EIN.

Warren Barton · Answer

@James Mc Ree a benefit I was going for was to increase revenue in the LLC, to better position it for funding the next LTR. From the replies though that’s not the right way to go about it.

James Mc Ree · Answer

If I understand this right, your 2 out of state LTRs have no connection at all to your LLC, so you aren't getting any benefits from the LLC there. Routing the revenue to the LLC will just cause it to route through the LLC back to you if this is a single member LLC. I don't see a benefit.

Warren Barton · Answer

Thanks @Colleen F. for replying. Operating agreement is generic from zenbusiness, doesn't seem to call out anything that would be an issue. My LLC wouldn't be managing these properties but is managing another property. At some point I'll take over those two as well and then for sure it'll make sense to use the LLC to manage them. It's sounding like I should leave things as they are for now.

Should property manager pay me through my SSN or through a pass-through LLC EIN?

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