Can my LLC Company hire my other LLC for property admin work?

Question

Greetings:

Question for you all.

Do any of you have more than one LLC company where one company hires and pays your other company for management/admin/reporting?

Is that OK to do?

I own two rental LLCs (with partners) and a Real Estate Services LLC (with a TC employed). I was thinking of hiring my RE LLC to do all the admin/reporting/quarterly for my rental LLC. Is that doable without getting into trouble?

Why pay someone else the admin business when I can give it to my other company? That's my line of thought anyway. Wondering if anyone else is doing this. Please advise and thanks.

Steve Vaughan · Answer

The is it ok to do question should probably be answered in the tax, legal forums by a tax pro.

I do this to an extent, but my wife and I wholly own all entities.  My mgmt Corp is retained by my commercial property LLCs for PM and maintenance/repairs.

My mgmt entity has the right but not the obligation to charge for services.  I strive to change passive income into ordinary earned income as little as possible. But i dont have non-spousal partners.

If I had partners and was paying for a service to a 3rd party anyway, avoiding SE taxes wouldn't be my focus so I would probably try to do it.

Hopefully a tax person can answer for sure, but I don't see a problem with it as long as your partners approve.

Olga M. · Answer

Thanks! Makes sense. My partner is my sister in one LLC, but not in the other two. I wanted to give the business to my company and my TC to keep her employed as well. I will take it in the legal. Thanks!