LLC formation question flips/rentals

[Mayer M.]

Hey, For rental properties is it best to have a standard LLC? and for flips a separate LLC taxed as an S or C Corp? I have a partner and we are equal owners. Thanks!

[Michael Plaks]

@Mayer M.

There're 3 completely different reasons to create an LLC

1. Regulate control between the partners

2. Legal protection

3. Tax benefits

#1 and #2 are attorney's questions. Asking fellow investors is akin asking neighbors for medical advice: everybody has an opinion, and all of them are wrong. I'm not an attorney, so I won't offer you my opinion. :)

#3 is an accountant's question. There are no tax benefits for rentals when you create any business entities. There could be tax benefits for flips when you create an LLC and choose it to be taxed as an S-corporation or a C-corporation. These benefits are only possible under specific conditions, the first of them being substantially profitable. And these benefits need to be structured in advance - they are not automatic. Need to discuss with an accountant, case by case.