Tax Filing Fees for LLC owned by my wife and myself

[Richard Anderson]

Hi Everyone, 

Just looking for a little feedback. My wife and I are working on renting out our first investment property. My long-time account suggested we register our LLC in just one of our names, otherwise he would have to charge us as a partnership; which is double the price of filing as opposed to if one of us owned the LLC. Does that sound normal? Does your CPA charge that way? Of course I understand charging double if it was myself and a partner I wasn't married to. He doesn't charge us double for filing our joint return...

[Michael Plaks]

Quote from @Richard Anderson:

Hi Everyone, 

Just looking for a little feedback. My wife and I are working on renting out our first investment property. My long-time account suggested we register our LLC in just one of our names, otherwise he would have to charge us as a partnership; which is double the price of filing as opposed to if one of us owned the LLC. Does that sound normal? Does your CPA charge that way? Of course I understand charging double if it was myself and a partner I wasn't married to. He doesn't charge us double for filing our joint return...

Your CPA is correct.

Illinois is not a community-property state. For non-community-property states, the IRS position is that a husband-wife LLC MUST be treated as a partnership and file a partnership tax return. And partnership tax return are immensely more complicated (and thus more expensive to prepare) than personal tax returns.

An LLC under one of your names could be disregarded for IRS purposes, and you can continue to file your personal tax return as usual.

There're at least two related questions that need to be thought through, and ideally discussed with tax and legal professionals. (And I mean real ones, not those who do $300 returns for 26 properties.)

1. Why do you need an LLC, to begin with. There're no valid tax reasons for that, so must be good legal reasons.

2. What are the legal and financial planning implications of a property owned by only one of the spouses.