LLC setup and the Real Estate Professional
Desperately need advice.
Long time investor...husband and I purchased rentals during the years of 2001-2006, all have mortgages in our name. Working on first of several blanket loans and it requires to close to an LLC.
Have 2 LLC's that were created under a different lenders requirements, did not close the loan and LLC's never used but created, in good standing, have EIN's. They required 2 DE LLC's: LLC#1 my husband and I are 50/50 partners and LLC#1 is sole member of LLC#2 which will be the borrower for the loan and it is a disregarded entity.
Since the expense has been incurred and we are set with another lender, and since LLC#2 is registered to do business in the states where the rentals are located we would like to use the setup.
To date I am a Real Estate Professional, this is what I do full time and my husband holds a job.
I believe that there will be no issue taking the loan to LLC#2, changing the deeds when the loan closes from us to the LLC and that income/loss will pass through to LLC#1.
I believe that since LLC#1 is a partnership that again we still will continue to report income/loss to our personal return and I can continue to be considered a Real Estate Professional.
I am concerned about a few things in how we are to state them in the operating agreement for LLC#1. If my husband and I are 50/50 partners, and it states that income/loss is passed onto the members based on their % of membership; DOES THIS CHANGE ANYTHING ON HOW THE INCOME/LOSS IS CALCULATED ON OUR PERSONAL RETURN AND CAN I STILL BE AN REP?
Not all properties will be absorbed into the blanket loans/LLC#2.
I do not wish to change how we report the rental activity, but the type of loan requires an LLC. I want to ensure we can pass through all income/loss through both LLC's to us and I can remain an REP.