Should my business entity manage my SFR that I personally own?

[Derek Scott]

This is largely a tax related question, but if there are other legal or financial or insurance things I should think about, please chime in.

We have a SFR that is the first rental unit we owned. We used to live in it. We've rented it out for a long time and for tax purposes, we just report everything on Schedule E. To help you visualize, we run this out of our personal bank account and track everything in Quicken with Rental Property Manager. It's co-mingled with our personal income and expenses which has never been a problem. We have never had to send 1099s because we've never done anything but small maintenance--way under the limit. And I do a lot of it myself.

Our other rentals are owned by our business entity which is an LLC. There we have proper bookkeeping which we set up in Quickbooks. We track everything related to running the business which is essentially focused on BRRR type deals. There we have payroll set up for our help and we also issue 1099s to independent contractors that do work for us. The LLC also owns personal property related to the construction such as trailers, tools, etc.

I don't want to put the first SFR in the LLC just yet because it has a mortgage with a due on sale clause. Whereas the likelihood of the bank calling the loan is low, I've decided against it. We have eight more years on the mortgage that interest rate is 3.875%.

But I wonder about having my LLC manage the 1st SFR on my behalf. ***The reason is that I could use my W2 employees to do some of the work.*** I'm thinking that it would work like this:

-Signed agreement between owners of the house (wife and me) with LLC to manage the property

-Next lease on 7/1 is between the tenant and the LLC.

-LLC collects rent via bank draft.

-LLC pays for maintenance, repairs, and improvements (eventually), deducting the cost from the rent.

-LLC keeps maybe 10% in management fees (a way for me build further basis in the LLC).

-LLC distributes net income to my personal account which gets reported on Schedule E / 1040

-Personal account continues to pay the mortgage, taxes, and insurance.

-LLC continues to file 1065 for partnership income.

-LLC continues to issue K-1s and the income/loss works its way to our 1040 each year.

Please let me know if you have advice beyond "call an accountant."

Thanks.