LLC for Property Management- Tax Issues? FICA?

[Brett Roth]

Hello,

      I'm sure this has been discussed before but I haven't been able to find the answer to my exact question so here goes:

It has been suggested to me that setting up a LLC to do property management (sign leases, collect rents etc.) and then have a separate LLC to hold title to the actual rental properties might be a good idea.

1. Assuming that the property management LLC dutifully and quickly pays all rental income to the property holding LLC, how, if at all, should the property management LLC be taxed? I know states can differ on all of this, so I'm just talking at the federal level

2. Would the property management LLC need to show income? If it does show income then I assume it would not be passive income and therefore subject to Self Employment tax (SSN, Medicare etc.)? Again, federal level only....disregard states regulation at the moment.

3. Finally, in your opinion, is it a potentially good idea for small time landlords to setup a separate LLC for the property management side of their business or is it "overkill"?

thank you

Brett

[Robert Gilstrap]

Single member LLC's are transparent for tax purposes and the income or loss flows through to your personal schedule C so I'm not sure how it's going to help you tax wise.

Maybe having an entity offers you some legal protections as manager so I agree with that. Maybe there is some elaborate state tax reason.

Rental income is passive and not subject to self employment tax.