LLC Tax Structure

6 Replies

My husband and I have formed an LLC for our buy and hold real estate business. We currently have 3 rental properties and hope to grow. Which tax structure would be better for us, a partnership or an S-corp? Thanks!

if you are just doing rentals (passive income), i think an S corp would be overkill.  I think the primary advantages to an S Corp only kick in when self employment t axes may be owed.  Please note i started most thoughts with "I think" :)

I would keep your 3 properties in the LLC as a disregarded entitity and just report it on your 1040. No real need for an S corp.

Rental income only triggers SE Taxes if you're a real estate professional. If you don't qualify at this point there would be no benefit to paying for filing an S corp return. 

IRS guidelines for a Real Estate Professional

Excellent, thank you for the responses!

Hi Karen:

If the both of you own the LLC and operate in a non community property state, you wouldnt be eligble to be treated as a disregarded entity. You would have to file as a partnership or s corp.

Every state is different, but in most states there are minimum taxes due on S Corporations. That isnt always the case for Partnerships. 

Another consideration is whether or not you use debt to finance your investments and whether for tax purposes they run losses. There are no basis restrictions for LLCs being taxed as partnerships where there are for S Corps

So...the answer to your question depends on multiple factors

Thank you. The properties are financed and do not run losses. 

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