4. Flexible Taxation
The LLC can select how it wants to be taxed. You can choose partnership, S-Corp, C-Corp, or disregarded (one owner) entity taxation. Partnership and disregarded taxation are the most common for real estate investments, whereby all the tax obligations and depreciation benefits flow through the LLC and onto your personal return.
If you are fixing and flipping properties (which the IRS considers a trade or business), you may want S-Corp taxation to minimize any payroll taxes. We rarely see LLCs choose C-Corp taxation (which involves being taxed at the entity level and the owner level – or double taxation), but with the LLC’s flexibility you can make that unique choice as well.
5. Property Transfers are Less Expensive
If your LLC is taxed as a partnership or a disregarded entity, you can move the property in and out of the LLC without tax consequence. Let’s say your bank, as part of a refinancing, insists that title be in your name when the financing occurs. You transfer the real estate out of the LLC into your name without tax consequence. After the financing is on title, you transfer title back into the LLC without tax consequence. If you had held title in an entity taxed as an S-Corp or C-Corp,
you would have to recognize any gain on such transfers.
THE LLC OFFERS GREAT FLEXIBILITY FOR ALL REAL ESTATE INVESTORS.
GARRETT SUTTON Attorney, Best-Selling Author, and Robert Kiyosaki’s Rich Dad’s Advisor
Corporate Direct (800) 600-1760
Garrett Sutton is an attorney and author. He has written a number of books for entrepreneurs and real estate investors, including Loopholes of Real Estate and Start Your Own Corporation. His newest book, Veil Not Fail, deals with the most overlooked facet of asset protection, protecting the corporate veil against legal attacks. Garrett’s firm, Corporate Direct, sets up and maintains LLCs and corporations in all 50 states. For a free 15-minute consultation with an incorporating specialist on these issues, visit https://corporatedirect.com/schedule/.
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