Rental Income vs Property Management Income

[Grant Shipman]

My investment partner and I will own a sfr property soon. it will be in an LLC owned by both of us. We will split the rental income equally. however the ten percent we budgeted for property management will go to me since I will manage the tenants. Will this ten percent be taxed as rental income or something else. how do I understand my options?

[Jay Patadia]

That 10% property management can be treated as Guaranteed Payments to partner. Guaranteed payment is a specific term in the Internal Revenue Code, which is defined as payments to a partner to a partner capacity for services or the use of capital if determined without regard to the income of the partnership.

Please let me know if you have any other question.