Legal Structure for Rental & Wholesale Operations

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Legal Structure for Rental & Wholesale Operations

Tucker Cummings
Investor · Raleigh, NC · Member since 2019 · 433 posts · 743 votes

I own 9 rental houses which cover all of my living expenses. Along the way of acquiring those, I sometimes came across a deal that wasn't for me, so would wholesale it out to a friend or another investor. I'm considering going into real estate full time.

I already have my rentals wrapped up in an LLC, but if I were to start wholesaling more would I wrap that into the same LLC or should I start a separate entity? If I should keep them separate, should that also be an LLC, S-Corp or something else?

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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
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Originally posted by @Tucker Cummings:

I own 9 rental houses which cover all of my living expenses. Along the way of acquiring those, I sometimes came across a deal that wasn't for me, so would wholesale it out to a friend or another investor. I'm considering going into real estate full time.

I already have my rentals wrapped up in an LLC, but if I were to start wholesaling more would I wrap that into the same LLC or should I start a separate entity? If I should keep them separate, should that also be an LLC, S-Corp or something else?

This is awesome. I am sure an attorney will chime into the legal issue here. 

From a very basic tax standpoint, if you think you are going to excel at wholesaling, you would need another entity and will eventually tax as S-corp. 

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    5y
    Originally posted by @Tucker Cummings:

    I own 9 rental houses which cover all of my living expenses. Along the way of acquiring those, I sometimes came across a deal that wasn't for me, so would wholesale it out to a friend or another investor. I'm considering going into real estate full time.

    I already have my rentals wrapped up in an LLC, but if I were to start wholesaling more would I wrap that into the same LLC or should I start a separate entity? If I should keep them separate, should that also be an LLC, S-Corp or something else?

    This is awesome. I am sure an attorney will chime into the legal issue here. 

    From a very basic tax standpoint, if you think you are going to excel at wholesaling, you would need another entity and will eventually tax as S-corp. 

    [email protected]941-914-7779
    INVESTOR FRIENDLY CPA®5241 Reviews
    WebsiteView Page
    TaxMD® | AI-Powered Tax Planning
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  • Steven J. Umaña
    Attorney · Columbus, OH · Member since 2015 · 95 posts · 60 votes
    5y

    I would always recommend holding each asset and company in a separate LLC (or other entity depending on tax ramifications) to mitigate risks stemming from one asset to another.

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    4y

    @Tucker Cummings

    Wholesale, in my opinion, is a low risk business. 
    Do you need an entity, maybe not from a legal perspective. However, you may want to speak with an attorney regardless.

    From a tax perspective, wholesaling generates ordinary income and you may benefit by having an S-corp setup.

    Reach out to your CPA for more guidance.

    Best of luck!

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  • Natalie KolodijBusiness Member
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    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    4y

    Keep rentals separate from wholesaling. 

    Separate LLC for wholesaling if you're going to potentially hit $50k+ especially

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  • Justin R.Pro Member
    Rental Property Investor · San Anselmo · Member since 2015 · 659 posts · 600 votes
    4y

    Talk with an attorney that knows YOUR specific situation. Like everyone else mentioned, you will most likely want a shell company to be the face of your business, and do all the quick work (Flips, wholesaling, business cards, leads, etc.) Keep those long term rentals separate and safe. Most likely a series LLC, but its really worth a visit with an attorney as no two investors are in the safe exact situation.

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