Posted by Bud Branstetter on January 15, 2001 at 09:11:05:
If the general partner is your C corp where is the personal liability. It owns 2% and 98% is owned by you and the family as limited partners.
LLC for each property? - Posted by Kevin Subbert
Posted by Kevin Subbert on January 14, 2001 at 01:24:08:
How do you guys set up your rentals? For asset protection and to mimimize taxes.
Is this statement correct?;
If I have 4 rental properies (SFHs) and I set up a land trust for each with a different LLC as beneficiary. Each LLC was managed by the same corp. This would give me the best protection because each property is owned by its own LLC. If something were to happen in one of the properties, the other 3 would be safely harbored. The taxes would be at the corporate level since the LLC’s would pass thru the income to the manager. If the income was enough to place the corp into a higher tax bracket than my personal income tax bracket than the LLC(s) would pay a salary(ies), and only pass thru the amount that would make it advantagous.
Do I make sense?
Kevin Subbert
Re: LLC for each property? - Posted by Bud Branstetter
Posted by Bud Branstetter on January 14, 2001 at 22:10:57:
Kevin,
Here in Texas an limited liability company costs $200 per partner per year. A limited partnership costs a one time $750 no matter how many members. It may be a matter of what is it that you have to protect. If it is just 4 rent houses only 1 LLC is practical. Of course two would be better if each were a co-beneficiary of the land trust.
One reason that the land trust is the first line of defense is its privacy. A judgement creditor cannot ask what else you own until they have won and taken a deposition. Your attorney will be sure your defense is over a justifiable length of time. You are fortunate in that you transferred the beneficial interest to your wife in those trust the month before the incident took place for which you were sued . Because you file a joint return the tax return does not identify when you did. Only you and your trustee know that you properly did it at the right time.
Your C corp will manage the properties and have just enough income to pay for all those expenses. The limited partnership will pass your passive income to you and you pay no medicare or SS taxes on it. You will have to pay your income tax and if you distribute it monthly you will file estimated taxes.
Re: LLC for each property? - Posted by JPiper
Posted by JPiper on January 14, 2001 at 14:52:01:
You could certainly use a separate land trust for each property…and you could use a separate LLC as beneficiary for each land trust. However, this might get somewhat burdensome if you ever have more than 4 properties, depending on how these LLC’s are actually set up (see below), and costly for set up, maintaining bank accounts/checks, tax returns, annual fees (if any) and/or franchise fees and other expenses. I would take a look at your cash flow from the properties, and see what percentage of your annual cashflow this costs you to put in place and maintain. Perhaps it’s nominal, but then again, it might be more of a factor than you think. Something to look at least. You might be able to get by with fewer LLC’s. While a separate LLC may be ideal, it may not be practical depending on the result of looking at all of the costs.
The rest of your post was confusing to me. Is this corporate manager also a member, or is it just a manager?
Depending on your answer to the above question, would dictate other questions.
But certainly one question that occurs to me is that converting rental income into corporate income seems like an ill-advised move to me.
You might want to clarify this structure further.
JPiper
Re: LLC for each property? - Posted by Houserookie
Posted by Houserookie on January 14, 2001 at 08:55:00:
Try asking Bill Gatten and William Bronchick the question. They are both attorneys, I believe.
Here’s my ten cents. You can setup a business trust for all your properties. No need to place in land trust, with LLC as benef, and corporation as manager.
From what i have gathered it can also do everything
a Pactrust can.
A business trust can do everything that a land trust
can. It can buy, sell, own, lease, exchange, etc…
You can setup as many business trusts as you like for
your business. It can be sued like any other entity.
On the plus side, with the exception of
the trust declaration, nothing is public
information. A business trust can do everything
that a land trust can, whereas a land trust is limited to holding real estate title.
Income tax passes through to the grantor and other
owners. There is no personal liability to any of
the owners of a business trust.
Great for both title holding and flipping.
A business trust has the best privacy protection, and
taxed to owners after all expenses. You can also elect to have it pass through to your corporation.
Houserookie
Re: LLC for each property? - Posted by SCook85
Posted by SCook85 on January 14, 2001 at 08:35:27:
Kevin,
My structure is very similar to this for the reasons that you state. Yes it is true!
Steve
Re: LLC for each property? - Posted by Kevin Subbert
Posted by Kevin Subbert on January 15, 2001 at 06:05:33:
Thanks Bud. The reason I was thinking LLC over LP was because in an LP the general partner is personally liable, right? But I guess it doesnt matter since I would have transferred beneficial interest to my wife a month or so BEFORE the incident were to happen.
Re: LLC for each property? - Posted by JPiper
Posted by JPiper on January 15, 2001 at 09:25:57:
Allow me to point out that what you’re discussing here is fraud. You, the trustee, and the notary would all be in collusion. But probably you and Mr. Branstetter were just kidding I suspect.
Meanwhile, it’s back to the books for you Kevin. If I recollect you have Bronchick’s LLC course (if I’m wrong please accept my apologies in advance)…and you seem to have missed some very important elements of it.
The general partner of a limited partnership could be a corporation. This corporation could hold a minor interest in the limited partnership. One of the benefits of the limited partnership is that a judgment is executed against the limited partners via “charging order”. You might want to read up on that.
You want most of your rental income flowing to the limited partners, NOT the general partner (especially if it is a corporation). The latter manages to convert rental income into corporate income…not advisable.
JPiper