Rental Property Investor · Miami FL · Member since 2020 · 9 posts · 0 votes
My lender is willing to close our Gatlinburg STR property in my personal name or in the name of my LLC. I would love to close in the name of my LLC to have less liability. But If I close in the name of the LLC then TN charges a 6.5% Franchise and Excise tax (6.25% on net income and 0.25% on book value of the property annually ) which would be a significant amount.
My wife will be running the Operations (Airbnb, VRBO, etc) through a separate LLC which will be paying me a monthly rent as passive income.
Please let me know your thoughts and any advice on how you have minimized the impact of franchise and excise tax on your properties?
I know there are certain exemptions such as FONCE but has anyone had any luck in getting approved for any of these exemptions ?
My properties are under my personal name and I have not run into an issue with franchise and excise tax. I would recommend consulting with your CPA/a CPA knowledgeable of Tennessee law and examining your options.
I suspect a fat umbrella policy will have you coming ahead financially while still offering significant liability protection. :)
My properties are under my personal name and I have not run into an issue with franchise and excise tax. I would recommend consulting with your CPA/a CPA knowledgeable of Tennessee law and examining your options.
I suspect a fat umbrella policy will have you coming ahead financially while still offering significant liability protection. :)
I would close into the LLC if you have the option. That's what I do with my properties. I also think you (and me) should be exempt and don't have to pay this tax.
There’s a lot of contradictory and misinformation out there on this subject but this is from the TN.GOV website See:
@Josh Madigan Hey josh I was leaning towards the FONCE exemption. That would give me some additional liability protection as well as minimize F&E taxes.
And I actually wanted to see whether someone here who actually closed in the name of the LLC was able to get the FONCE exemption when holding the STR?
@Luke Carl I will also post it in a bigger discussion post, but I wanted to know whether STR properties who closed in the name of LLC were actually getting the FONCE exemption or were they paying the 6.5% franchise and excise tax. I know there is no income tax in TN however they have this 6.5%F&E tax if you are a LLC, or corporation doing business in the state. Also spoke to a few CPA's and got conflicting information that's why I'm trying to get information directly from the investors here. Let me know if u have a reliable CPA who deals with FONCE and I will contact them as well. Appreciate any help I can get.
You Could always Quit Claim deed them into your LLC after closing.
Unless your plans are to do something shady you shouldn't need an LLC. A mortgage is a level of protection, insurance another. You could get an umbrella policy if your that worried to add more protection.