Mortgage Notes & LLC Taxes

[Michael Terry]

Good morning all, 

I have formed an LLC out of state in order to insulate myself when buying mortgage notes. If I put that asset in the name of my LLC and receive payments through it, I am assuming I will have to pay state and federal taxes on it when the time comes.

Are those taxes set up like other small businesses or how does that process work? I plan on getting a tax professional to handle all this, but any color or context I can put to the question would be helpful. 

Cheers.

[Ned Carey]

@Michael Terry if you are the only member of the LLC then it is a "Disregarded Entity" in the IRS' eyes. in other words any income to the LLC is considered your own income.

Also, actually I bet @Jamie Bateman knows this, but note investing does have a tax benefit. Yes it is taxed as ordinary income. However it is NOT earned income. You do not pay social security or Medicare tax on it.