New investor here, looking at investing in rental properties in Southern New Hampshire. In the process of setting up an multi-member LLC in New Hampshire where 1 of the members resides, other members are out of state. Looking for guidance in terms of how the whole tax-process will work and other considerations for the early stages of setting up this LLC.
What is the timing of the Form 1065? I have read online it says you ust file Form 1065 no later than 15th day of third month of the year following the table year. So is it correct to take that as we would need to file in March which is ahead of when we would individually file our K-1s? And if that is the case is that because we would need that Form 1065 to get approved before we can accurately account for our individual filings? Or can Form 1065 be done at the same time as the individuals members taxes?
The 1065 partnership return is due one month prior to individual 1040's. This is new as of 2017 so that individual members have ample time to receive their K-1's and file their 1040's on time.
This means March 15th, or September 15th (if an extension was filed).
Double check with your accountant or tax attorney, I am neither, and the above is solely my opinion and not to be trusted as fact or taken as actionable advice...
Thanks for your feedback! That timeline makes complete sense. As someone whos been on here a while and investing in the same general area as what I plan, I had a look at some of your older posts and you seem to really know your stuff. Few other questions below if you don't mind shedding light
Tax â with multiple members, 2 of which living out of state of NH, any idea if the LLC established in NH need a NH accountant for the 1065 portion, and then each individual investor responsidble for the K-1 filing withing their own state?
LLC - We are not planning on managing properties for now, just owning, I noticed you mention in older posts using 1 LLC per certain number of properties (5, 10, etc), what is the benefit of that vs having 1 LLC that owns as many properties as possible? I would have thought keeping everythign owned under 1 LLC might be easier to stay organized?
Any other tips / advise for someone just at the very beginning? Plan as of now is buy and hold, to start with one rental property and pay down the loan while using that cash flow to expand and buy more down the road. I feel like just the experience of completing one deal will help a whole lot just in terms of understanding all of the moving pieces, as now it is a bit overwhelming!
@Mark McDonnell my NH accountant recommends owning only 1 property at any time under an LLC. Reduces liability on all properties owned by a single LLC if something was to happen to one of them.
@Mark McDonnell holding properties in multiple LLCs or one LLC is going to depend on your circumstance. There are pros and cons to each. As a multi-member LLC, just remember that every time you buy a property, if you have to create a new entity every time, you're going to be dealing with a boatload more paperwork and legal fees to be constantly setting up and shutting down entities... and don't forget who the rent checks will be made out to. "Was the tenant at 123 Main St supposed to pay rent to ABC, LLC or 123, LLC?" After a while, there's going to be a lot of challenges with having a lot of different entities.
Weigh that against the liability of holding multiple properties in one LLC. I have clients that do both and it really depends on your circumstance. Would recommend talking to a CPA here in NH.
I don't know the answer to your first question, but I doubt that would be necessary.
If you own everything under one LLC, you haven't limited your liability a whole lot.
However, the more LLC's you have, the more expenses (annual State registration filing, accountant fees for tax filing, etc).
When I own large multi-families, I will own each under its own LLC. However, for single family homes with NOI's of $7-12K/year, spending an extra several hundred on each one to have it in its own LLC is cost-prohibitive. (Besides, here in NH, you'll need that money to give to the town for the fifth half of your real estate taxes.) By putting several into each LLC, I can reduce those costs while still reducing potential liability by not putting all of my eggs in one basket. Call it a happy medium...
These are my personal opinions, I'm not an attorney or accountant, blah blah blah.
Your NH accountant is giving you legal advice that coincidentally results in more business for him/her. Conflict of interest? Maybe, maybe not. Just a thought...
@Troy Zsofka good point I honestly didn't think of that! I don't think so though, because the filing for each one doesn't create that much extra work. But certainly something to consider. Setting up an LLC in NH is about as easy as it gets especially now that you can do it online. I filed for one the other day and received my documents of formation within an hour.
I believe @Troy is correct about March 15th. When your accountant does the taxes, they will produce the k-1s for distribution to the partners.
When considering multiple LLCs, bear in mind that each LLC has to have it's own bank account, unless you have a property management company paying all bills and collecting all rents. Even then, in order for the PM company to send the LLC the net income, it has to go somewhere, and can't go to your own bank account.
LLCs in NH are formed for liability protection, not for tax savings, so keep in mind the equity in each LLC.
I personally have only one long term multi or commercial property in each LLC.
When looking for an accountant, you don't need a local accountant, you need a real estate savvy accountant. If they have NH clients already, they will already know the NH state tax treatments.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing