business structure in MA

9 Replies

for investors in Massachusetts with two or three properties how do you structure things? do you have an S corp for the taxes or something else? I know LLCs are expensive so wondering what others are doing.

it depends on your situation. 

Are you trying to protect yourself against liability?
How many owners? If so, are they all equal partners?
Are you going to be hands on or property management?
Are your properties going to be local or out of state?

@Billy Abildgaard

MA S-Corps file form 355S and there is a minimum tax of $456
MA LLC's that are single member'ed would report information on person tax return. No minimum fee paid
MA LLC's that are multi-membered would filed form 3 which does not require a minimum fee.

S-corps are limited to allocating income based on ownership of shares
LLC's are flexible in ways of allocating income

S-corps can save taxpayer with payroll tax
LLC's are limited to saving taxpayer with payroll tax

You would also have to factor in what the initial and annual fees paid to the SOS for S-corps and LLC's.

Originally posted by @Rich N. :

it depends on your situation. 

Are you trying to protect yourself against liability?
How many owners? If so, are they all equal partners?
Are you going to be hands on or property management?
Are your properties going to be local or out of state?

@Rich N. looking to get protection, but mostly best way to handle taxes.  Would likely be me and one other person with a small amount of equity.  I'll be doing the property management myself and plan to keep all properties in MA for now

Originally posted by @Basit Siddiqi :

@Billy Abildgaard

MA S-Corps file form 355S and there is a minimum tax of $456
MA LLC's that are single member'ed would report information on person tax return. No minimum fee paid
MA LLC's that are multi-membered would filed form 3 which does not require a minimum fee.

S-corps are limited to allocating income based on ownership of shares
LLC's are flexible in ways of allocating income

S-corps can save taxpayer with payroll tax
LLC's are limited to saving taxpayer with payroll tax

You would also have to factor in what the initial and annual fees paid to the SOS for S-corps and LLC's.

@Basit Siddiqi I hear you always want more than one person in your LLC for liability reasons. Supposedly an LLC is easier to pierce if you're the only person in the LLC. I'd likely add a family member with 1% stake or something if that's the case. So sounds like S corps provide greater tax benefits then?

There is at least 2 trains of thoughts.

1. Place in a LLC and keep everything separate from your personal (to avoid piercing the corporate veil).
Note: remember to sign everything with " your name, Manager of LLC "
Note: hard to get loans on properties in LLCs

2. Place everything in your name and spend the $500 annual LLC fees on $1MM umbrella liability insurance policy.
Note: if you have a lot of assets, then you would need more than $1mm and possibly the insurance companies may not underwrite it.
Note: easier to get bank loans

@Filipe Pereira , Thank you for the mention, my firend! 

@Billy Abildgaard . Hey Billy, from liability protection purpose, LLC does not become harder or easier to pierce if you have one person single member LLC or multi-members LLC. What's more important is how you handle business, and if you follow all administrative steps and formalities. WIth that being said, it is easier to pierce corporate veil of an S-Corp, because there are more formalities to follow.

From a tax perspective, LLC taxes as a partnership or an S-Corp (even if single member) is better than single-member LLC, because the more you distance yourself from your company, the less the risk of being audited.

Feel free to reach out if you'd like to talk in more details.