Single business LLC or per property?

Question

Hey everyone. Wondering what the general consensus is on how to structure LLC's for investment properties. Do most people have an LLC that covers all of their properties or do you do a separate one for each property? What are the pros and cons of each?

Thanks!

John Warren · Answer

@Christopher Mikle that is a state specific question for sure, so make sure you speak to a local attorney who knows the laws in the state. Here in Illinois, my attorney had me do a single member LLC for each property I own individually. The down side is that each one needs its own corporate tax return, but the upside is that the cost to file was pretty much identical with the series LLC or close enough that it didn't matter.

This is definitely a decision that should be made with one's own attorney though. You need to hear from both your attorney and your CPA on something like this.

George Skidis · Answer

Every LLC adds a cost to your business. You only need as many as you need. No one can decide that for you.

Starting out I would have one LLC running the business, but owning nothing. Then have another LLC own your properties. If you start owning different classes of property then consider grouping ownership in separate LLCs by class of risk.

Tax consideration. Every single member LLC can go on either Schedule C or Schedule E of your personal income tax return. You can have 100 single member LLCs if that is what you want and you can afford all the annual fees. If the LLC has two or more members it must file a separate income tax return for each multi member LLC  by March 15th each year. EVEN THE FIRST YEAR established. I don't care if you formed the LLC on December 31st, 2019 and made no money. If it has a tax ID number a return is due in 2 and 1/2 months later on March 15th 2020. File or face a per month per member late filing penalty. The late filing penalty is currently $195.00 per month per member.

Legal Consideration - Your LLC must be authorized to do business in the state where the money is made. Wyoming LLC doing business in Florida. You must register as a foreign entity in Florida and meet all their tax and filing requirements.