LLC or S Corp ? WI or AZ???

Question

I want to open somehow of a legal entity where I can add my rental properties located in Milwaukee WI. and all other  real estate related activities that I have going on in the state of AZ.

I am  Realtor in the state of AZ and I do some property management here in Phoenix AZ.

Any ideas where should I open the LLC in the state of WI or AZ?

And another question is LLC or S Corp for RE? What's the best option?

Thank you all in advance!!

Happy New Year 2022!!

Jason Bott · Answer

@Elvis Dur I'd would definitely have your CPA take the lead on this.  Don't want to put in a lot of time and expense to find out you didn't get your tax obligations minimized.

Once you have the LLC's set up, insurance can provide high liability limits to protect the equity in the LLC's.

Sonya Mays · Answer

If you're doing business in the state of Wisconsin then you should create an LLC entity for your rental properties located in the state of Wisconsin. You can also have a separate LLC in the state of AZ for properties managed/purchased in AZ. If you plan to purchase more rental properties in MKE/WI then it would be best to structure the deals with their own separate LLC entity as most of my out of state investors who purchase/buy/invest in MKE/WI prefer to do it this way. And make sure you have the relevant bank account statements/preapproval and operating agreement if applicable for submitting offers, as many seller entities may require additional documents for offer acceptance, purchase or re-fi. Hope this helps, best of luck with everything!

Daniel Hyman · Answer

@Elvis Dur

While an S-corp might be a consideration for your realtor income, you likely won't want to hold rentals in there. You should consult with a CPA for guidance on that structure.

As for the location of your LLC, you'll want to consult with an attorney who can advise you on domestic/foreign LLC options for maximum asset protection.

Elvis Dur · Answer

Thank you Nick! I really appreciate it! It makes sense. And thank you for the tip about opening two accounts for commissions and rental income under one LLC umbrella!  Thanks again!

If you ever travel to Phoenix please let me know!

Nick Rough · Answer

I would think since you're working in AZ to have the LLC established there would make the most sense. You should be able to have separate bank accounts (one for your RE commissions, one for rental income, etc.) all under 1 LLC name. I would think keeping them separate would be better so funds aren't comingled.

Also I am a realtor in PA and I know it is possible to have your business set up as an LLC, but you can be taxed like an S-corp. I would talk to a tax advisor to see if this is possible in your state. This seems to be the most beneficial structure for realtors paying themselves a salary from the research I've done. Good luck!