How should I register for my FEIN

11 Replies

My husband and I formed a LLC to hold our soon to be acquired rental properties. I am now in process of registering for a federal EIN. I put the number of members as 2 but the government website is saying that we will be classified as a partnership. Is this what I want? Since we are husband and wife, should we just register as a single member LLC? We are based in Tennessee if this makes a difference.

Yep, more than 1 member in any LLC is considered a partnership by the IRS. No worries there.

Because my state doesn't have an age minimum on members, my 2 minor children are members as well.  Here in WA if you sell less than 50% in any calendar year you don't have to pay excise tax on a sale.  In my case that's worth $20k so they each own 2% and us 48%. 

Are you buying little houses with debt or commercial 5+ unit apt buildings @Sherri Li ?

We're just buying single family homes with debt right now. Is there a benefit to having your minor children as members? We were planning on hiring our minor children to do secretarial tasks and paying them from the LLC.

@Sherri Li You could elect the LLC to be taxed as an s-corp so that you would file an 1120s corporate form instead of being classified as a partnership.

For more info here is a link:

https://www.irs.gov/businesses/small-businesses-self-employed/llc-filing-as-a-corporation-or-partnership

@Jonathan Rodriguez  Is that better than filing as a disregarded entity?  Since we're husband and wife, I believe we can be filed as 1 and count as a disregarded entity?

@Sherri Li I don't want you to rely on my advice however I attached the link so you can get some insight. I think LLC taxed as an s-corp is better so you can issue yourself a k-1, and a salary. The k-1 is issued as ordinary income and is not taxed for Social Security & Medicare. If you report a salary to yourself via a W-2 any way you are taxed or set up the entity will pay payroll taxes and unemployment insurance as an expense.

Originally posted by @Sherri Li :

We're just buying single family homes with debt right now. Is there a benefit to having your minor children as members? We were planning on hiring our minor children to do secretarial tasks and paying them from the LLC.

Oh - well I wouldn't do an LLC at all then, personally. Financing little residential property inside an LLC is a pain. Transfers later to get around the issue causes even larger problems with title and hazard insurance. To each their own I guess.

No advantage to the small % members being minors.  Just needed to get below 50% each safely for our purposes.  Our kids don't need answering to and can't mess us up!

@Sherri Li I think the reason many say to add your kids to your LLC is to get out the Single-Member LLC status. Some states have made different rules related to SMLLCs and they are not favorable to the LLC.

I agree with @Steve Vaughan as well. Transferring property out of your personal name has issues, and buying the property in an entity name may not be the best idea. It will come down to your own personal philosophy, risk tolerance, and the deal itself (financing to an entity is nowhere near as favorable as to a person).

Putting "rental properties" in an S corp can present a lot of problems. Putting flips in an S corp is usually better.

You need to review how debt basis works in S corps before putting real estate into an S corp. meet with a CPA to avoid a nightmare years later. It is worth the quick consultation.

For LLC two members you are a partnership. You can electrónico to be treated as S Corp AND keep being a LLC. SCorp election does not change LLC company structure.

Do not put your kids as members. You don't want them face liability or file taxes as they own for the profits of the company.

If you are one member LLC just get insurance and report on personal tax the income as expense on schedule E.

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