Tennessee Franchise & Excise Taxes

[Travis Henry]

A partner and I are closing on a quad in Clarksville later this year. My attorney, who is also an investor himself, is encouraging me to hold title in our personal names and run the rental income through our existing member-managed LLC. Apparently this is what he and his dad do for the properties they pick up around town with a $5 million umbrella insurance policy.

From my understanding, the only upside here is that they don't have to pay the franchise tax (0.25%), which is tied to the value of the assets held in the LLC. However, they would still be on the hook for the excise tax (6.50%) since that's based on the net earnings of the LLC during the year. If that's the case, then I'm not sure I understand what the point of the LLC was in the first place since it doesn't provide liability protection with the asset being held in our personal names. What am I missing?

[Dean Letfus]

Use an LLC in another state is what we do ourselves and for our clients. Although my Memphis attorney states that we wouldn't be liable for either tax anyway.