Landlords & Property Owners LLC

[Ivy Booth]

I have an LLC for my rental properties and flips. Recently, my accountant suggested I should not do the LLC as a partnership; instead, I should register it as single ownership Spouse only , as it is not necessary when married.Question to any flippers and renters what is you take on this?

[Savannah Wallace]

Hi Ivy, 

Your accountant is likely suggesting this approach to avoid the need for filing IRS Form 1065, the partnership tax return. When an LLC is treated as a disregarded entity—meaning it has only one owner—it does not file its own tax return. Instead, all income and expenses are reported directly on the owner's individual tax return.

If you reside in a community property state, both spouses can own the LLC together and, under IRS rules, the entity may still be treated as a disregarded entity for federal tax purposes.

You mentioned that your LLC holds both rental properties and properties for flipping. I generally advise clients against combining passive investments (such as long-term rentals) with active business activities (such as flipping) within the same entity. This is because income from flipping is considered active and is subject to self-employment tax (15.3%), while long-term rental income is generally not. If both types of income are mixed in a single entity, the IRS may classify all the income as active, potentially subjecting your rental income to self-employment tax as well.

To minimize self-employment taxes, it is important to keep active (flipping) and passive (rental) income streams in separate entities. If your active business income exceeds $30,000–$40,000, you might consider operating the active side through an S-corporation, which can help reduce self-employment tax liability by allowing you to split income between salary and distributions.

Lastly, separating these activities also helps protect your passive investments from liabilities arising from the active business. Keeping them distinct is a strategy for both tax efficiency and asset protection.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.