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All Forum Posts by: Adrian Brown

Adrian Brown has started 6 posts and replied 21 times.

Post: Land Trust for long term rentals

Adrian BrownPosted
  • Investor
  • Austin, TX
  • Posts 21
  • Votes 4

Has anyone used a Land Trust to own long term rentals? If so, any law firm or agency you can recommend to help with this?

Post: Single Member LLC with both spouses

Adrian BrownPosted
  • Investor
  • Austin, TX
  • Posts 21
  • Votes 4
Quote from @Mitchell Zoll:

Single Member LLCs have generally had the same protections as "multi-member" LLCs in Texas before the bill. (Senate bill 2314 was a clarifying bill in response to attempted charging orders of an LLC in a divorce case. You can see the case is cited in the bill analysis). But to answer your question, the election you need to make for tax purposes is with your CPA. First work with your lawyer to make sure your LLC & Company Agreement are set up to support the election (equal distributions, single class of member, etc.), but then your CPA can work on filing the election with the IRS.

 @Mitchell Zoll I've got the LLC formed as of yesterday, and I'm filing for my EIN on the IRS website, and they have it very clear with regards to husband & wife in a community state and still declaring the Single Member status. However, I do not have an attorney as it relates to the Operating Agreement, is this part of your practice and if so, maybe we can have a call to understand your cost to create a proper OA, thoughts?

Post: Creating Single Member LLC in Texas with both spouses

Adrian BrownPosted
  • Investor
  • Austin, TX
  • Posts 21
  • Votes 4
Quote from @Dulce Davis:

Thanks for the clarification. I've slept since then so couldn't recall exactly how it went down.😁I had looked on my EIN paperwork for you also but saw nothing special on it either.

@Dulce Davis haha, no worries! :) 

Post: Creating Single Member LLC in Texas with both spouses

Adrian BrownPosted
  • Investor
  • Austin, TX
  • Posts 21
  • Votes 4
Quote from @Dulce Davis:

Very welcome.

 @Dulce Davis for what it's worth, when I went to file for my EIN on the IRS website so I could see what was asked, and they asked what state, how many members, and then they asked if husband & wife, and then the next page actually said, you're in TX which is a community state and you can elect to be Single Member or Multi member, and I just had to choose which one. So it seems, the most important thing is that I'm telling the IRS my Single Member status and they'll be aware of my tax treatment going forward. That said, I'm going to also mention that I'm electing Single Member when I create the Operating Agreement since it can't hurt to be explicit in there as well, and I also looked at Form 205 that gets filed with the secretary of state, and that form has a "Additional Provisions/Information" which could be used to add it in there as well. Ultimately, the IRS EIN website seemed to be the missing piece that gives me more comfort here, and I just wanted to share since you've been trying to help me figured things out... now you and I can make it easy if someone ever asks us in the future!

.

Post: Single Member LLC with both spouses

Adrian BrownPosted
  • Investor
  • Austin, TX
  • Posts 21
  • Votes 4
Quote from @Greg Scott:
Quote from @Adrian Brown:However, my goal is to make this a single member so that it is disregarded for federal tax perspective, thus saving me from needing to file for the entity itself
I understand what you are saying.  Having a DRE may allow you to avoid the entity filing.  Since the same data would need to be collected for your personal return, it seems the cost or time savings would be minimal. 

There are also some downsides.

You should be aware that the federal government believes that some people using DREs have been illegally avoiding taxes.  In the past three years they have started requiring more information on DREs.  In our syndications we have to collect W9s from people using DREs and when filing the K-1 returns, both the DRE TIN and the personal SSN must be reported.

 @Greg Scott good to know, and I will indeed have an EIN for my SM LLC and separate bank account of course. Not sure what other folks are doing, but I don't intend on avoiding taxes, I'll simply pay them via my 1040 instead of having to get a K-1 for me and my wife, which then requires a 1065, only to report income on my 1040 which is just more overhead and cost for no benefit since it's just me and my wife, no partners.

Post: Creating Single Member LLC in Texas with both spouses

Adrian BrownPosted
  • Investor
  • Austin, TX
  • Posts 21
  • Votes 4
Quote from @Dulce Davis:

Found it! I was wrong it WAS legalzoom I used. My document itself does not state my designation of single member.  You could just go thru the motions of filing it out until you get to that point and see if it tells your guy what to put. I didnt have to pay until all questions were asked. When I filled out my W9, that designation is an option there also. Could it be that it was asked during the creation just so the gov would have it in record🤷🏻‍♀️I'm not sure. Apologies I'm not more help. 

Hi @Dulce Davis - Thanks for looking into this to see if anything was mentioned in the documentation or operating agreement, and for confirming it was legalzoom! I've since had two other firms recommend that we just mention that we're declaring a Single Member in the Operating Agreement or the Organization Meeting so it's notated in the official documentation, which does make me feel better that it's at least stated somewhere, but I'll still review the legalzoom process to see what I can learn. Thanks again for all of your effort to try and help, I definitely appreciate it.

Post: Single Member LLC with both spouses

Adrian BrownPosted
  • Investor
  • Austin, TX
  • Posts 21
  • Votes 4
Quote from @Greg Scott:

An LLC does not have to be a single-member LLC to have pass-through tax treatment while retaining liability protection. Talk to your CPA.

I have heard some lawyers say a multi-member LLC may provide more protection, but I suspect that varies by state. Talk to your attorney.

A disregarded entity is an entirely different thing.

@Greg Scott what you said is correct, the LLC is a pass-through entity regardless if it's a single member or a multi member partnership where K-1s are distributed to each member. However, my goal is to make this a single member so that it is disregarded for federal tax perspective, thus saving me from needing to file for the entity itself since a single member is taxed like a sole proprietorship with profits/losses hitting my 1040, saving time and money from filing taxes for the entity itself. As for protection, you're right in that in the past some states have viewed multimember as having more protection, but I live in Texas and just recently a new law went into affect on 9/1/2023, where Texas views a single member LLC no different than multi member with regards to liability protection (senate bill 2314). But again, in short I want the single member treatment because it's more efficient from a tax perspective since it eliminated an extra filing, and therefore extra cost, every year.

Post: Creating Single Member LLC in Texas with both spouses

Adrian BrownPosted
  • Investor
  • Austin, TX
  • Posts 21
  • Votes 4
Quote from @Dulce Davis:

Its my spouse and myself on the LLC. I dont recall the name of the website. It was like legalzoom, but was a differnt option. I'll pull the paperwork tomorrow and see if I can find the name for you. Maybe my paperwork itself will state the details. If you dont hear from me by Wednesday you may want to check back in, in case I cant find this post again, or forget lol

Thank you @Dulce Davis, I sure appreciate your help! And yes, I'll get back on Wed if I don't hear from you by then. Thanks again, and have a great night!

Post: Creating Single Member LLC in Texas with both spouses

Adrian BrownPosted
  • Investor
  • Austin, TX
  • Posts 21
  • Votes 4
Quote from @Dulce Davis:

I used one of those online sites to create my LLC and this particular question was asked during the process. I also opted for the single member designation under house bill 2314.

 Thanks @Dulce Davis, do you recall who you used to create your LLC so I can reach out to them? Also, did it include you and a spouse, or just yourself? The firm I'm using is unsure what's needed for Single Member status since me and my wife will be listed.

Post: Rental properties, LLCs, & S-Corps

Adrian BrownPosted
  • Investor
  • Austin, TX
  • Posts 21
  • Votes 4
Quote from @Sean Morrison:

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

It may be helpful to explain why you want to pay yourself a salary. Schedule E income is typically passive income and not subject to self-employment taxes. However, if the rental activity is considered a business activity, and the owner materially participates in the business, the income may be subject to self-employment tax. So, there may be significantly higher taxes. It's definitely worth talking with a CPA about this before you make any changes.

Hi Sean - Thanks for this information, sorry I'm just seeing it, but I didn't get notified of a response! Either way, I'll definitely talk to my CPA tomorrow about this, but I've since reconsidered this complex structure, as I'd prefer a simpler approach, so I'm thinking about a Single Member LLC formed in Texas that holds properties in TX, KS and MI, and simply registering the LLC as a foreign entity in KS and MI. Either way, my only objective to pay myself a salary was so I could take the profits and put them into a solo401k.