Posted by Tim (Atlanta) on January 16, 1999 at 13:45:02:
I got the excerpt from one of Bill’s articles on this site.It was on asset protection.
I haven’t got his course on LLCs yet.
LLC’s & Tax ??? - Posted by BR
Posted by BR on January 15, 1999 at 18:46:26:
I have established : (correct me if I am wrong)
- LLC’s are better for Rental Properties
- Multi member LLC’s are better than single’s for assett protection purposes
- Member managed LLC’s will cause the member to have to pay self employment taxes.
- Manager managed LLC’s will probably avoid the paying of self employment taxes.
Thus, my ? is," if I form a management company to manage
my rental properties will I have to pay self employment taxes on my rental income? Would this management company have to be a corporation?
Re: LLC’s & Tax ??? - Posted by Tim (Atlanta)
Posted by Tim (Atlanta) on January 15, 1999 at 19:22:50:
I believe your assumption number 3 is not correct. An excerpt from Bill Bronchik’s article on LLC’s and asset protection :
An LLC, if it has two or more members, is treated as a partnership for federal income tax purposes. Thus, like an ?S? corporation, the profits and losses ?flow through? to its owners. On rental activities, these profits are not subject to self employment tax (an LLC which engages in ?buying and flipping? may not be considered ?passive? activity and thus subject the members to self employment tax. Thus, a corporation may be better than an LLC for this purpose).
Most states now recognize ?single member? LLCs, that is, an LLC with only one owner. The IRS treats a single member LLC as a ?non-entity? for tax purposes. That is, the member would report as though the LLC did not exist. Thus, if the investor was reporting his rental activities on schedule ?E? of his federal income tax return, a transfer of property from his own name to a single member LLC would not result in any change of reporting. Furthermore, an LLC between husband and wife can still be treated as a ?single member? for federal income tax purposes. Thus, one could form an LLC for each property he owns and still file only one tax return!
Re: LLC’s & Tax ??? - Posted by Tim (Atlanta)
Posted by Tim (Atlanta) on January 15, 1999 at 19:15:24:
I would highly recommend Bill Bronchik’s articles on asset protection and the LLC.
As I understand it, if you set up an LLC, the income flows through to your tax return just like an S-Corporation would. I own an S-Corporation, and pay NO self-employment taxes on the dividend type income I receive from my corporation.
This income is listed on your tax return under schedule E. The S-Corp should prepare a K-1 statement which determines the exact amount of the income.
Hope this helps.
Re: LLC’s & Tax ??? - Posted by BR
Posted by BR on January 15, 1999 at 22:47:07:
What page is the exerpt from that you quoted?
Read page 36 of LLC workbook.
Re: LLC’s & Tax ??? - Posted by JHyre in Ohio
Posted by JHyre in Ohio on January 16, 1999 at 07:49:50:
Whether employment taxes are due on LLC income depends on the type of activity conducted within the LLC. Generally speaking, if it is “active” (e.g.- flipping) you pay the employment taxes, while if the activity is passive (e.g.- rentals), no employmentvtaxes are due.
Bronchick posted a Treasury Regulation cite in a prior post that went into this in more detail- I forgot the cite. If I find it it, I’ll post it.
John Hyre
Re: LLC’s & Tax ??? - Posted by PETER
Posted by PETER on January 15, 1999 at 20:41:25:
I WOULD LIKE TO ASK YOU SOME QUESTION ABOUT THE CORPORATION .I’M ALSO IN ATLANTA PLEASE IF YOU CAN E MAIL ME YOUR NUMBER AT GPP2@YAHOO.COM PLEASE.