Entity Structuring with S Corp and multiple LLCs

6 Replies

I was thinking I need to evolve my entity structure approach with my real estate business. My wife and I have an S Corp that holds our properties today. We have properties in IL and TN. I'm thinking I need to add some LLCs to my overall Entity Structure plan. Is it correct to have the LLCs owned by the S Corp and then move the properties into an IL LLC and a TN LLC? The S Corp would then own no property directly. Just owns the LLCs. Any thoughts or advice here? How should I set up the LLCs so I don't have to do tax returns for them but let everything flow to the S Corp for tax return handling? Anybody else deal with this type of structuring? Pros or Cons?

That is how I have it set up. I have S Corp which owns and LLC which owns many LLC's which owns the real estate. Its the most protection for you and allows you to just have one tax return.

Thx for the reply Antoine. Couple more questions please. 

1) Which LLC is owned by the S Corp? And are there any other members that own this LLC with the S Corp? What kind of tax declaration did this LLC declare as well so as not to be forced to do a tax return? Is there any property held in this one LLC or does it just own the other LLC(s)?

2) The other LLC(s) that hold the properties, is the owning member the one LLC noted above? Anyone else listed as a member so as not to be a single member LLC? What tax declaration did you make for these LLC(s) so as not to be forced to do a tax return for these LLC(s)?

3) Just to confirm, you are saying in this entity structure you are only doing a tax return for the S Corp and not for any of the LLCs...right? Then the S Corp return flows to your personal return as profit or loss....right?

Thanks again for sharing!

Is your S Corp holding rental real estate? It is generally not advisable to hold rental real estate in a Corporation. 

Agreed Lance, that's why I'm asking about this and seeing if I can add the LLCs to my overall Entity Strategy while not messing up the S Corp I have in place to flow it's losses to my personal return.

You should consult with a CPA. Taking a property out of a Corporation and contributing the property to an LLC can potentially trigger income taxes.

Interesting point. Good to be aware of. I started to explore the Conversion of an S Corp into a LLC too. There are Statutory conversions and Merger conversions. IL seems to require a Merger conversion in order to do this....a little more complicated process, but doable. My understanding is there is a way to do this conversion with no tax consequence if all moved into the new LLC entity you set up for this. The merger paperwork is completed and filed with the Secretary of State. Once done you close down the S Corp. My understanding anyway from my readings on this topic. Are you aware of any other method to solve this?

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