New LLC Tax Structure Question

[Jeffery Speck]

I have a newly formed LLC that has 3 members. What tax structure should we use? I like the benefits of S-Corp, however we wont be paying ourselves a salary. Any recommendations??

[Chris Seveney]

@Jeffery Speck

Talk to your accountant to see what works best for all 3 of you

[David M.]

@Jeffery Speck

What aspect of the S-Corp do you like??? that is if you aren't wanting to pay yourselves a reasonable salary?  You know it should cost more to have S-Corp because of the extra filings/reporting...

What are you doing???? What's the LLC for?

Its not advisable to hold real property in corporations, and S Corp are more corporate-like.

Just stay with the default partnership and deal with the 1065 and K-1.

More importantly, discuss with a qualified professional or two.

[Michael Plaks]

Quote from @Jeffery Speck:

I have a newly formed LLC that has 3 members. What tax structure should we use? I like the benefits of S-Corp, however we wont be paying ourselves a salary. Any recommendations??

You cannot "like" the benefits of an S-corp because you clearly do not know them, based on your "no salary" comment. 

You're starting from the wrong end. The starting point is: what is this 3-way LLC for? What are you actually doing together?

[Jackie Linne]

Hi. It's my understanding that formatting an S-corp for taxes benefits under an LLC is beneficial after you hit a certain benchmark, I believe over ~$40k in profit. Until then, the s-corp doesn't apply. Good luck!

[David M.]

@Jackie Linne It may be worthless if the earn a "high salary" in their day jobs too...  It could also be worthless if they are only doing long term rentals since its all passive income...

[Fulton Abraham Sanchez]

@Jeffery Speck, hi. It would be best for you to go over a suitable business structure and tax implications. There are over 20+ enlisted CPAs assisting real estate investors nationwide with their tax planning and entity formation. Feel free to set up a call to see if he/she is a good fit.

Best, Fulton

[Bruce D. Kowal]

You have already chosen your tax structure. You are an LLC. The Members will taxed as if this were a Partnership, unless you elect to be taxed as an S corp. i.e. an LLC taxed as an S Corp. Go ahead, complicate your life, right off the bat!

[Basit Siddiqi]

By default, a multimember LLC is taxed as a partnership.
There is an opportunity to be taxed as a corporation(C or S) if proper elections are made.

Just a reminder that an LLC is required to file a partnership by March 15 of every year.
The partnership will generate a form K-1 that is required to be given to each member which is then used to complete their individual tax return.

[Zach Kraning]

The determination of tax structure will depend on the nature and goals of the business. Based on your salary comment, I think you may be a bit confused to the benefits/downsides of each structure. You should seek professional guidance.

[Gordon Harris]

Jeffrey, did you ever reach a definitive answer to your question? I am facing the same question: I am looking to create a 100% pass through entity not subject to taxes or the payment of a salary. LLC potentially exposes to me Self-Employment Tax; an S-Corp election requires the payment of a salary; my preference is to avoid either. Thanks!

[David M.]

@Gordon Harris depends on what you are doing... LLC may expose you to SE tax, but only if your income is subject to se tax... Again, if you are just renting, than having a LLC doesn't create any SE tax implications, by itself.