Tax efficient tax structure

[Mei Zhu]

Hi, 

I have LLCs both two members and single members . I am wondering, is that the most Tax efficient way moving forward as I purchase more properties and forms more LLCs?
Also in the state of New Jersey, I have been creating my own operating agreements, I just want to confirm that I am doing the right thing.

Thanks in advance 

[Michael Plaks]

Quote from @Mei Zhu:

Hi, 

I have LLCs both two members and single members . I am wondering, is that the most Tax efficient way moving forward as I purchase more properties and forms more LLCs?
Also in the state of New Jersey, I have been creating my own operating agreements, I just want to confirm that I am doing the right thing.

Thanks in advance 

As other people already mentioned, you most likely will not reduce your taxes at all with LLCs if you are planning to merely hold rental properties. In fact, it is likely to backfire by creating very significant extra hurdles (like double-entry bookkeeping and commingling prevention) and very significant extra costs (professional level bookkeeping and possibly the need to file separate partnerships tax returns).

Allegedly, LLCs could enhance your asset protection, but not being  an attorney I cannot comment on it. I can only express my concern that your self-created operating agreements could derail whatever legal protection you may be shooting for.

Overall, I'm not in favor of spending your limited resources of time, energy and money on creating entities early in your real estate, especially multiple entities. Unless you invest together with other people, then it may be necessary.

Beyond these very generic pointers, the only way to responsibly advise you would be through a thorough one-on-one discussion of your current situation and your business plans.

You can get a lot more opinions on this forum by searching it for "benefits of LLCs."  Here are some older threads to start with:
https://www.biggerpockets.com/forums/51/topics/806960-s-corp...
https://www.biggerpockets.com/forums/109/topics/1200723-llc-...
https://www.biggerpockets.com/forums/109/topics/1212815-i-ne...
https://www.biggerpockets.com/forums/926/topics/1097903-all-...