Spouse as Member of Holding Company?

Question

Hello everyone,

I am in the process of setting up a holding company for my two current rentals and any future rentals. My question, is there a benefit to having my spouse as a member on the holding company. This is then no longer a single member LLC and makes taxes a little more difficult. Any input would be appreciated.

Thanks,

Basit Siddiqi · Answer

@Kevin WynA husband and spouse LLC in a non-community property state may require the filing of a partnership return.There may not be any tax differences but you may want to speak with an attorney on how it may change for you legally by creating the LLC.

Steve Morris · Answer

"How is that, by itself, a tax consequence?"

Depends on how he handles the investment income as a filer. You file jointly, it'll be different taxes paid than as not jointly. So he may want to structure how the property is held and where the income passes thru to.

Eamonn McElroy · Answer

@Steve Morris

How is that, by itself, a tax consequence?

Kevin Wyn · Answer

@Steve Morris we file jointly. I have W2 income and my wife is a stay at home mom.

Steve Morris · Answer

Since the LLC is a pass-thru, you file a joint return or not? That'd be the tax consequence.

Sean Morrison · Answer

The potential legal benefit could be that the spouse would count as a partner, which would make it harder to pierce the corporate veil. However, that’s pretty state specific, so it would be worth speaking with a local attorney who understands asset protection law.

Kevin Wyn · Answer

@Ashish Acharya and @Eamonn McElroy Thank you for the feedback.

Eamonn McElroy · Answer

There might be a compelling legal reason. But if there's no compelling legal reason, it should probably be avoided. You'd generally be increasing complexity for tax with no corresponding benefit increase Generally, with both of you as owners you'd have federal and state partnership returns. Would need to maintain full financials (P&L and Balance Sheet), capital accounts, etc.

@Ashish Acharya

Does anyone of you make more than 135k from W2? If not, it’s not beneficial from tax prospective.

I'm not following, care to expand?

@Ashish Acharya

Does anyone of you make more than 135k from W2? If not, it’s not beneficial from tax prospective.

I'm not following, care to expand?

Ashish Acharya · Answer

Does anyone of you make more than 135k from W2?

If not, it’s not beneficial from tax prospective.

Kevin Wyn · Answer

Also, I am located in Indianapolis and both of my rentals are as well. Not sure if that makes a difference

Spouse as Member of Holding Company?

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