Revocable trust and LLC with 2 members

[Jay P.]

My friend and I have committed to investing in a multifamily deal in Texas and we are thinking of creating an LLC with both us being the managing members. I would like to know if the membership has to be in my name or can my revocable trust be a member? The reason being, I'm not sure how will the assets be handled in the LLC if I'm no longer there.

Of the three options, which ones are possible and recommended to be the members.

Individual (me) - Individual (friend)

Trust (me) - Individual (friend)

Trust (me) - Trust (friend)

Thanks.

[Eamonn McElroy]

This is generally something that you should discuss with your estate planning attorney and CPA, i.e. those that know your facts, circumstances, and goals or those that are willing to take the time to learn them.

Your revocable trust can be the member of the LLC. Generally revocable trusts are disregarded for federal income tax purposes, so it will be as if you own the LLC interest directly for federal income tax purposes even if it is owned by the revocable trust.

That said, it's not as much of a no-brainer as it used to be.  Partnership tax entities that have a disregarded entity as a partner cannot elect out of the new Centralized Partnership Audit Regime.

Your tax practitioner can have the deep discussion with you on what this entails, and work together with your attorney to advise on the pros and cons, so that you can make an informed and confident decision.