Re: LLCs and taxes - Posted by JHyre in Ohio
Posted by JHyre in Ohio on April 26, 1999 at 12:15:16:
Couple things: Fisrt, I do not understand why you cannot personally deduct a lease if it’s incurred in the course of a business or profit-seeking activity. Basically, whether a lease payment is deductible is driven by the underlying business reasons, as opposed to the type of entity taking the deduction. In short, if Business A can take a lease deduction, it may do so regardless of whether the business form is corporate or sole proprietorship. Ditto that with LLCs, single-member or otherwise.
Both S-corps and LLC’s are good for holding passive income producing properties. If partners are or will be a factor, I prefer LLC’s due to their flexibility (e.g.- can allocate different percentage of loss, credit, ordinary income or gain to each partner) while S-corps require pro-rata pass-through of all income and expense items. If you (or you & spouse) or sole owners, I prefer S-corp- payroll taxes are slightly less of an issue with S-corp. Choice between S-corp and LLC for holding income producing property is also driven by your state’s treatment of each.