Setting up Tax strategy for LLC

8 Replies

Hello everyone

I am in the Boston area and first time Investment property buyer . Our offer was just accepted and getting ready to get inspection started.

So we have formed a LLC with the state and i wanted to get some information how to set the LLC up for tax and accounting purposes. What is best way to set up the LLC strategy for Tax purposes. If any one can give general advice and suggestion that would be really helpful so that when i talk to Tax accountant i can bring up options to him and get his opinions on it as well knowing most of you have already gone through that.

Thank you

If you're doing a rental, and it's the only one you'll have, a standard LLC should be fine. If you anticipate making more than 40k per year in profit, you might want to designate S-corp tax status for your LLC. You can always do a late designation and wait and see.

@Tulan Kantesaria

@Matt Motil , is right if you were in flipping business.

S-Corp will do no better for tax saving compared to LLC. People elect to be taxed as S Corp to save on self employment taxes, but rental income are inherently not subject to SE tax, thus S election is not needed.

S Corp also complicates the transaction if you ever want to sale. 

LLC is more of asset protection vehicle than tax saving tool. Very rarel you will see the benefit.

Originally posted by @Tulan Kantesaria :

@Ashish Acharya @Matt Motil

at this point this is our first rental and nowhere close to making $40k in rental income. More like $4k or little more.

So Just a standard LLC should be fine.?

 If it's just a rental, you're not doing yourself a service by going S-corp

@Matt Motil understood then will use it as a regular LLC instead of setting up as S corp. Just a titbit i forgot to mention is that it is a partnership with my brother so does that make a difference since it will be set up as partnership if i am not mistaken.

should have mentioned it before.

Originally posted by @Tulan Kantesaria :

@Matt Motil understood then will use it as a regular LLC instead of setting up as S corp. Just a titbit i forgot to mention is that it is a partnership with my brother so does that make a difference since it will be set up as partnership if i am not mistaken.

should have mentioned it before.

No, you will specify all of that in the operating agreement. Doesn't matter for tax purposes. LLC is a pass-through entity, so both of you will get a K1 at the end of the year based on your equity distribution in the LLC.