How to structure llcs

Question

I’m looking to get into real estate whole selling and rental properties. What is the best way to set this up?

Here are a couple of my ideas

A holding company with a management company

Separate llcs for wholesale and rental properties

Sean Morrison · Answer

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

When creating LLCs, it's usually best to have separate entities for passive income (rentals) and active income (wholesales, flips). Whether an active income company should be taxed as a corporation is a question for your accountant based on your business activity.

Bryant Naylor · Answer

Hi Daijuan. I'm not expert in this, but here's my two cents. Wholesaling/Flipping are considered active income - you'll want to run these businesses in Corporations. Long term buy/hold can be done in your name or in an LLC. LLC's offer some benefits such as asset protection and anonymity but if you don't structure them correctly, it can all fall back on to you. There are lots of different strategies and you'll likely hear/read this a lot but it all depends on your situation. There's really no "one size fits all" for this type of stuff. If/When I set up a system, I will have a Holding LLC Partnership as my primary and from there will have LLCs created for different rental properties. Not sure if I'll have one LLC per property or not - that's still up in the air. LLCs aren't free. I would then make each of these LLCs as DISREGARDED - meaning all the gains/taxes flow back to my holding LLC for tax purposes. Cheers. r/Bryant