Best way to structure a MF deal

[Albert D.]

I'm a newbie to the multifamily business. Currently have a 8-unit under contract, with closing in a month. I wanted your guidance/advice on the best way to structure the purchase such that I can protect my assets and lower tax. Should I put it under a trust or a LLC? In TN, I think a LLC will be taxed on the assets owned no matter profitable or not. So I'm hesitant to set up a LLC if benefits are materially outweigh the couple thousand tax charge. Will a combo of a trust which owns the property and a LLC as beneficiary of the trust provide the protection and tax benefits? Trying to think this through. Let me know your thoughts and ideas. Many thanks.

[Tom Mole]

I am not a tax guy AND I live in California, so do NOT consider this post as tax advice. That said, let share what my tax guy said.

An LLC is fine way to hold property that you intend to own for a short period of time, but you will see better tax benefits on long term, cash flow properties in an S-Corp. This is due to dollar for dollar write-offs available to a corporation that are not allowed to an LLC.

The intention of a Limited Liability Company is asset protection, not tax management. The same can be said about land trusts. Corporations are another matter. Depending on how you set them up, you could end up paying much more or much less tax. This is where you need a competent tax planner familiar with corporate taxation. 

So, talk to your tax guy. I don't mean the friendly people at your local H&R Block either.  I do mean a real corporate tax planner competent in both federal and Tennessee tax law. (Think "tax attorney".) Perhaps Amanda Han could refer you to someone local to you.

In this forum you cannot legally get the answer you're seeking, but hopefully you get an idea who to ask and what ask about. I hope this helps.

Cheers!!