What is the use of llc holding companies?

Question

What's the use of a holding company for rental properties? Is it suppouse to reduce taxes? Reduce liability? Reduce management headache of "needing" multiple bank accounts?

Eamonn McElroy · Answer

Disagree with the previous poster. LLCs generally have no tax effect if they are taxed as a disregarded entity or partnership.

Maybe the taxes change if a corporate tax election is made for the LLC, e.g. S Corp or C Corp, but appreciating assets like real estate generally should not be held in a corporate tax entity.

Basit Siddiqi · Answer

@Patrick J.LLC's are normally created to limit your liability. If something happens within the LLC, theoretically, your assets outside of the LLC won't be targeted. You should consult with an attorney to discuss the liability protections afforded by LLC's.LLC's can also provide a level of anonymity - People will see the owner of the real estate as an entity instead of you.

Elisabeth Lernhardt · Answer

A privacy trust can do the same. And it does not get recorded. Even works in California. But as you pointed out it works best in combination with an LLC that is formed in a privacy state like Wyomimg.

David M. · Answer

@Patrick J.

Agree that legal entities don’t help with your taxes.

In my opinion, the holding company helps by adding an extra layer of asset protection. Each LLC or legal entity will need its own bank account — so this just adds one more. It might be helpful if you are moving funds between the other entities. If you didn’t have it, you’d be taking personal draws and contributions. With the holding company, the draws and contributions go “up” to the holding company then back “down” again the tree of ownership.

Also, it can help with anonymity. You first form a LLC in a anonymity favorable State, then form all the other ones with that first LLC as the Member. Now anybody searching through public records should effectively dead end at your first LLC and not be able to find you personally.

Does that help?

Betty Klein · Answer

LLcs defer liability, not taxes. But it depends which state you are. In California single member LLCs are not immune from tort. Also for real estate purposes they have to be formed in the state where the real property is located. Some states will allow serial LLCs, they hold multiple properties in legaly seperate entiies, but your fees and administation is combined under one entity. Anderson taxadvisors has videos on the subject, they are a lawfirm out of Las Vegas.

Nick C. · Answer

You hit the nail on the head - most people use LLCs to reduce liabilities and taxes. I know I do.

What is the use of llc holding companies?

What is the use of llc holding companies?

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