Pete Kici Financial Services

Tax tip for real-estate investors.
4 Most Common LLC Structures and How Savvy Real Estate Investors Use Them 👇

1️⃣ LLC (Single Owner - No S-Corp Election) --> Great for holding rental properties and small businesses generating a loss or small amount of income (usually below $150k profit per year). If you are a GP, consider using this to hold your GP interests in various syndications that you sponsor. Remember, even if your GP carried interest distributions are substantial, you still don't want them to run through an S-Corp EVER.

2️⃣ LLC (Multiple Owners - No S-Corp Election) --> This is taxed like a partnership and is the best way to hold real estate in an LLC with more than one owner. It is a pretty flexible business structure. Also great if multiple GP's want to use this entity to collectively be a GP in a syndication.

3️⃣ LLC (Single Owner - WITH S-Corp Election) --> Best for running a profitable business that you own and pay yourself a small salary from (such as a brokerage, property management company, property flipping, etc.). DO NOT use this to buy ANY real estate that you aren't just planning to flip. If you are a syndicator collecting fees, you may want to run them through this entity if they are substantial (but make sure not to run your carried interest through this entity or list this entity as an owner in the syndicate operating agreement)

4️⃣ LLC (Multiple Owners - WITH S-Corp Election) --> Same as above but with multiple business owners. Each gets paid a salary. DO NOT buy rentals with this entity or use it to be a GP in a syndication. Best for funneling fee income from syndications to multiple GP's if those fees are substantial.

Of course, this is not legal advice. This is just a few high-level observations I have made with commentary around the key points that a lot of people miss.

Also, This is your daily reminder to NOT OWN RENTALS IN AN S CORP.

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