Hi everyone! Forgive me if these questions are already out there, but couldn't find them after some searching. I have a few rentals that are already listed under one LLC.
1. Given that my LLC would then be listed as the previous owner for all properties, would it be beneficial to transfer them individually to land trusts? I don't know how much added privacy this would add for existing properties.
2. If the current LLC becomes the beneficiary of new properties each under land trusts, would it behoove me to split the main LLC in two for tax purposes? I assume the two LLC's might be in a lower tax bracket than the current all-encompassing one.
3. Would a single LLC beneficiary per land trust be the maximum security scenario? I would assume that this is untenable and many land trust to a given LLC makes more sense.
4. That being said, why would anyone make a large holding LLC that holds the sub LLC's within it as a holding LLC? Would this not defeat any tax benefits of splitting LLC's as well as potentially increasing liability by tying the properties together under one legal entity?
Thanks in advance!
Get a good insurance policy and be protected.
You should look into a business trust, gives you the same protection as a LLC with the tax advantages of a trust.
LLC's are not taxable entities, the income passes straight through to you anyway, so it doesn't matter if you've got $10k passing through 5 different ones or $50k passing through one.
There are no tax benefits to slicing and dicing LLC's, where did you get that idea?
There is still a benefit to deeding over to land trusts, in that it makes it much more difficult to ascertain your total holdings from the public records. A trial lawyer may conclude that you have little net worth.
Someone might use a holding LLC domiciled in a strong asset-protection state like Nevada, which would own their local LLC's. This has the effect of ensuring that any legal actions against your local LLC's are governed by the holding LLC states's laws, which may be far better as pertains to charging order protection, for example.
It is worthwhile to carve up into multiple LLCs at whatever point you feel that your net worth in LLC assets is great enough to warrant the additional protection. Only you can determine this number, though many use $250k as a maximum amount of equity per LLC.
@David Beard @Wayne Brooks I got that idea from an investor friend of mine that apparently was confused. Thanks for the clarification.
Interesting point about the holding LLC being in a more amenable state. Other than that, the only other benefit I found for having a holding company would be tax benefits, but that really doesn't apply to holding LLCs since they are not taxable entities. Are there any other benefits I'm not seeing?
@Jonathan Wilks I've looked up the business trust instrument, but from what I've read it seems like only very specific businesses, like those running mutual funds really need that structure and using it when not necessary just garnishes attention. Please correct me if I'm wrong as I have not done much research on the topic.
There is a strategy to using multiple LLC's. I don't believe any of them change your total tax bill. Everyone's situation, comfort level, and knowledge level is different so I'd suggest consulting with a CPA and a lawyer at a minimum about your certain situation to decide what method is best for you. I know it's not the answer you wanted to hear, but there are literally thousands of ways you can structure things and everyone is different.
For Federal tax purposes, LLCs can elect to be taxed as a corporation rather than as a pass-thru. If that election is taken, the result is multiple taxation of the earnings- the income is taxed at the Corp-LLC level, then again at the individual level. There are benefits in terms of timing personal income tax recognition, but for many situations you pay less tax by sticking with the pass-thru.
I'm not licensed in FL and I recommend you consult with a CPA in FL regarding your particular circumstances to receive personalized recommendations. This advice is provided for informational purposes and it's use indicates agreement to limit my liability to the amount you paid for it (that's $0, by the way). Have a nice day.
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