Land Trusts / Tennessee / LLCs

[Ben Stout]

Hello everyone,

I began buying rental property in Tennessee this year after investing in other states for the past 10 or so years. In the past, the use of entities and liability coverage and the like was usually fairly clear (pass-through taxation/fairly inexpensive to form, etc.) Tennessee seems to be a different ball game altogether.

To form an LLC is expensive, to maintain it is $300 a year. I can deal with that. What becomes burdensome is franchise and excise tax. It's a lot. My accountant said that LLCs in TN for holding real estate are "unattractive." There apparently used to be a provision called the FONCE Family Owned Non Corporate Entity clause in which you could apply for tax-free status. That is gone.

I have looked into land trusts and found a few lawyers suggesting that they are a viable option in TN while others say they are not recognized. My accountant said I could draw up a living trust and go from there.

I had been thinking to control land trusts through an out-of-state LLC, but this is becoming a massive headache. I might be best-served by just keeping my umbrella and liability coverage sky high, but this makes me squirm.

Does anybody have any advice or insight? Thanks.