SFH personal rental transfer into SMLLC

[Joshuam R.]

What is your experience in doing so for the following areas:

- Landlord insurance policy (I learned and confirmed with agents that my name would remain, and we just go ahead and add the LLC into it also) (This will also be under an umbrella policy)

- Loan (I learned that as long as the LLC is owned by the original primary loan holder, they will not need to call on the loan)

- What are the TAX advantages/disadvantage of doing this (my status is not full-time investor, still hold full time W2 job, and a SMLLC)

Thank you very much BPeers!

[Bjorn Ahlblad]

An LLC is a 'disregarded entity' by the IRS and offers no tax advantages.

[Joshuam R.]

Quote from @Bjorn Ahlblad:

An LLC is a 'disregarded entity' by the IRS and offers no tax advantages.

Your answer is not a strong one and it is not fair, not helpful for others reading on this post thread. Next time expand your thoughts or knowledge vs just a quick answer. Thanks.

Your statement applies to SMLLC, but it does not apply if you file as S-Corp to IRS:

• Since you are a single-member LLC, you will initially be classified as a disregarded entity for the purposes of filing a federal tax return.
  • If the only member of the LLC is an individual, the LLC income and expenses are reported on Form 1040 (U.S. Individual Income Tax Return), Schedule C, E, or F.
  • If the only member of the LLC is not an individual, the LLC income and expenses are reported on the owner/member's tax return.
• If you do not wish to accept the default classification of disregarded entity, you can:
  • File Form 8832 (Entity Classification Election) to elect corporate status, or
  • File Form 2553 (Election by a Small Business Corporation) to elect S corporation status.
• Single-member LLCs may not file a partnership return.

Also you did not truly engage in sharing on the points I posted. .....(where is the down vote button lol)

[Tzvi Ausubel]

@Joshuam R.

The transfer to a single member limited liability company will by default be treated as a disregarded entity for US income tax purposes. This means that the rental income and expenses is reported on your Form 1040, Schedule E, rather then an partnership return (form 1065), C-corporation return (Form 1120), S-corporation return (Form 1120-S), fiduciary return (Form 1041).

You can elect to be treated as a C-corporation or an S-corporation, however, you are then subject to different income tax consequences, and an additional tax filing for the rental income and expenses stated above. C-corporations have double taxation (tax on income at the corporate level, and tax on dividends when earnings and profits are distributed to the shareholder/member), while S-corporations are flow-through (so no double tax). S-corporations are still subject to some corporate tax provisions, which generally make owning real estate not as attractive for long-term ownership.

In the simplest form, a single member LLC offers the best of both - strong legal protections if the LLC formalities are maintained (separate bank accounts, annual member meetings, etc) and easier income tax compliance on your Form 1040 (no double tax, no extra return, no corporate income tax rules).

If you add a partner to a single member LLC (aside from another disregarded entity you own), you then have to file a partnership return (Form 1065).