In general- an LLC will not have a tax impact... it is mainly an asset protection strategy.
As far as an s-corp, it is not usually a good idea to hold rentals in one, as there are issues if your strategy changes in the future.
S-Corps may be beneficial if the income you are producing from real estate is ordinary income and subjected to self employment taxes (like flipping homes, wholesaling, property management).
Be sure to talk with a CPA that knows your entire situation before making this decision.
Real Estate Agent/Property Management · Houston, TX · Member since 2014 · 1k+ posts · 827 votes
8y
If I had it to do all over again I would do the LLC. I received some bad advice and went with an S-corp structure.
Not giving financial advice but I was informed that the LLC doesn't have any real tax advantages because all the income passes through to the owner(s). With the S-corp you pay yourself a salary of $X a year, and the rest stays with the S-corp.
The problem with the S-corp is it is very burdensome with regard to reporting and other regulations. And honestly, I'm not making enough money to justify the hassle of dealing with the S-Corp. I've actually been thinking of converting to an LLC.
So my two cents, and that's all it's worth, is that if you're not making a ton of money, start out with an LLC. You can always convert to an S-Corp down the road.