Real Estate Investor KnowledgeBase
Print

LLC Benefits For Rental Properties

PostedAugust 4, 2024

llc benefits rental propertyBy Jason Watson, CPA
Posted Saturday, August 3, 2024

There are several benefits of owning your rental property in an LLC as we’ve discussed throughout the chapter. Here is a summary-

  • Separate checking account for compartmentalization. However, you could easily open another personal checking account for the same effect.
  • Anonymity provided the state allows for displaying the registered agent only (many do, but many also list the “organizer” who is normally you, the person). If a state requirements additional ownership reporting beyond a registered agent, a multi-tiered or multi-entity arrangement can solve this such as a Wyoming LLC owning a Texas LLC, which we discuss in more detail.
  • Orderly ownership (wealth) transfer baked into the Operating Agreement side-stepping Wills and Trusts. This is super efficient when a holding company LLC owns a gaggle of other LLCs that each own a rental.
  • Division between the holding company and the operating company.

With a multi-member LLC you also get these fun things-

  • Lower audit rates. Not that you’re trying to do anything nefarious, but who wants to defend their actions if avoidable?
  • Mechanically show the basis in the rental property absorbing (cloaking) that big depreciation deduction from your even bigger cost segregation report.
  • Rules of the road for all members (owners) of the rental property or real estate venture including deal structures.
  • Exit strategies including divorce, death, valuation approaches, etc.
  • Some, yet flimsy, protection with Charge Orders and other financial protections.

Downsides with an LLC owning a rental-

  • Additional tax return and the associated preparation fees in a multi-member LLC environment (unless you are in a community property state).
  • Annual Secretary of State filings. Some states are cheap, some are insanely expensive.
  • Franchise tax or some sort of LLC fee charged by a state’s Department of Revenue (which are separate from Secretary of State filings… they get to double their pleasure).

I Just Got A Rental, What Do I Do? 2024-2025 Edition

Rental BookThis KB article is an excerpt from our 320+ page book (some picture pages, but no scatch and sniff) which was released September 30, 2024, and is available in paperback from Amazon, as an eBook for Kindle and as a PDF from ClickBank. We used to publish with iTunes and Nook, but keeping up with two different formats was brutal. You can cruise through these KB articles online, click on the fancy buttons below or visit our webpage which provides more information.

I Just Got a Rental, What Do I Do?

Get practical rental property tax tips with humor, backed by real cases – click here to learn more!

Kindle - I Just Got a Rental, What Do I Do?

Get practical rental property tax tips with humor, backed by real cases – Now on Kindle!

PDF - I Just Got A Rental, What Do I Do 2024 Edition

Get practical rental property tax tips, backed by real cases – now in an accessible PDF!

Talk to a Real Estate CPA About Your Rental Property

Please use the form below to tell us a little about yourself, and what you have going on with your investments and wealth-building objectives. WCG CPAs & Advisors are real estate CPAs, tax strategists and rental property consultants, and we look forward to talking to you!

The tax advisors and business consultants at WCG are not salespeople; we are not putting lipstick on a pig expecting you to love it. Our job remains being professionally detached, giving you information and letting you decide within our ethical guidelines and your risk profiles.

We see far too many crazy schemes and half-baked ideas from attorneys and wealth managers. In some cases, they are good ideas. In most cases, all the entities, layering and mixed ownership is only the illusion of precision. As Chris Rock says, just because you can drive your car with your feet doesn’t make it a good idea. In other words, let’s not automatically convert “you can” into “you must.” Yes, it is fun to brag about how complicated your world is at cocktail parties, but let’s not unnecessarily complicate it for the bragging rights.

Let’s chat so you can be smart about it.

We typically schedule a 20-minute complimentary quick chat with one of our Partners or Senior Tax Professionals to determine if we are a good fit for each other, and how an engagement with our team looks. Tax returns only? Business advisory? Tax prep, and more importantly tax strategy and planning?

Should we need to schedule an additional consultation, our fee is $250 for 40 minutes. Fun! If we decide to press forward with a Business Advisory or Tax Patrol Services engagement, we will credit the consultation fee towards those services.

Text WCG Offices

Need to get in touch through a quick text?  We’ll respond back as soon as we can.

Call Our Amazing Team

If you need to speak to someone, we’re good listeners!  Give us a call and we’ll help you out!

Chat With a Tax Pro

Taxes are complicated.  We make them simple.  Get in touch with a pro here at WCG!

Table of Contents