Entity Structure- 2nd Real Estate Brokerage Company

[Kevin Wattenbarger]

What do you think is the best way to structure a second real estate brokerage company? 

Background: I have a Florida real estate brokerage company (an LLC that has elected to be taxed as an S-corp) that is 100% commercial real estate focused. We do quite well in our market. I pay myself an annual salary and have 2-3 hourly employees along with a growing group of agents (ICs). I am affiliated with a top ten commercial real estate company and run an office in tertiary Florida market. The franchisor does not want residential real estate transaction run through the brand and I completely agree with that philosophy.

However, I personally invest in residential rental properties (over 50 units) and know I can easily grow a separate company that will handle residential real estate brokerage transactions and residential management assignments. 

Due to Florida Real Estate rules, I can't have two DBA attached to the LLC that is the current brokerage corporation (the commercial firm). An entirely separate entity will be needed and brokerage corporation will be needed.

To start the residential firm will be a single member LLC but may turn into a partnership in the near future. What do you think is the best way to structure this? Create a new, separate single member LLC to handle the residential transactions? Or create a new LLC that is owned by the existing LLC that is already an FL real estate corporation that has made the S-Corp election? Any other ideas?

[Ashish Acharya]

@Kevin Wattenbarger , 

Usually, the entity structuring is simple for most of the beginners. Yours is not simple. And I would suggest getting an attorney and CPA. 
I agree with @Account Closed .I think creating separate SMLLC  that is owned by you rather than S-corp to hold the properties that you already own is a better idea. There are various reasons.

You cant just transfer assets to the S-corp owned LLC without owing taxes. Your S corp would have to own a property to contribute it to its 100% LLC to qualify as SMLLC of S-corp.

For tax free treatment, If S-corp creates 100% owned LLC, and if you want to contribute asset to that LLC without tax implication, you and S-corp would be a partner in that LLC, and it would create a partnership, not a Single member LLC. That would just complicate things without creating any benefits. You could just create your 100% owned SMLLC and do the same thing, tax-free transfer.

Ignoring what I said, even if you do all the required sale/contribution to put all the asset in the S-corp 100% owned LLC. The rents/activities passing through the LLC to S-corp would be the rental income on the S-corp books, that would not align with your goal of separating two businesses.

Also, even if you create separate SMLLC and distribute all the profit to your Scorp, the bookkeeping needs to happen at LLC level, not S-corp. What I meant was, even if dont reinvest the profit in the S-corp, you still need to keep books for LLC.