Parent Company or Not Yet ?

Question

I need to start an LLC for my 1 Rental to Own Property. I plan to buy more when I understand Real Estate. The new ones will be closer to my home, so they will be buy and hold properties. This rental was my personal home. I have contracts, but really need different ones. (can I find some on Bigger Pockets, for South Carolina. Rent to Own ) .

Main question is starting the LLC , I'll be doing for the Rental, and I will have more. Should I setup a Parent Company LLC now..or when I het a 2nd property ?

Do you pay taxes on all LLC's created ?

How does the money change hands ? If there is 1 LLC I understand money comes in then profit is paid out to me. What happens when a Patent Company is created.???

How , legally, does the money flow ?? does it go

Tennant> Rental Account > Profit> Parent Co. > Owner

\

Mortgage Payment

Or Does Profit not have to pass through Parent Co. and paid to owner ?

I would think if it passes through Parent then I'm paying taxes on the same money twice !!!??? Right ??? Or is that where a 1099 comes in ??.

Ernest Rogers · Answer

PM Company. ? This rental is pretty easy. He wants to buy, has to many businesses going on to be approved for a house. So we spoke about him doing a rent to own... he will pay rent until its paid off. if he moves, of vourse I will go through a management company.

So the Parent is the Entity ? I would directly pay by check from Rental to me. Not to the Entity , then me ?

Is it easy to setup the Entity later as owner of the Rental LLC without changing things, contracts , etc ?

I was thinking of creating the Entity LLC to build the business credit and begin building business history.

What do you think ?

Just making sure I won't have to run the Rental Payments/Profits through the Entity LLC as well as the Rental LLC.

Nick Redding · Answer

The rent would go to your LLC bank account. You would then write a check to yourself from the LLC to your personal account with whatever profits you have on a monthly basis as an 'owner draw'. LLCs are pass through eintities so you are only taxed once and most costs are tax deductable.

At this point you may not even need an entity. Especially if you hire a PM company, they will do the dirty work and then cut you a 1099 at the end of the year.

Also, please note that I am not a tax professional, but I did take half of a business 101 class at Devry once.

Parent Company or Not Yet ?

2 Replies