What is the best legal structure for rental property?

Asked about 4 years ago - Southaven, MS

I receive rental income in addition to my wages. What business entity would be the simplest and most convenient entity for a busy individual?

Attorney answers (4)

  1. Brian Bennett Pastor

    Pro

    Contributor Level 8

    1

    Lawyer agrees

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    Answered . In my experience, always have your accountant answer this question (or a lawyer with an LLM in Taxation). My accountant has uniformly recommended an LLC to hold property, though honestly, I don't know why. THE IMPORTANT concept is that (1) you do have a corporate entity to hold the property; (2) that you work with your tax advisor on how the property is contributed to the entity (often people buy the property under their personal name then later want to place it under the corporate name and this creates issues because the owner never changed title to the company name and often fails to have the lender mortgage company involved. So the owner is often in a mixed up legal situation where they believe they are protected by the corporate shield, and for tax purposes the property is reported as belonging to the corporation, but the title is not in the corporate name and neither is the mortgage. This represents a mess. So make sure you work closely with a good tax attorney, good tax accountant, your mortgage company and make sure the property is properly titled.

    **Legal Disclaimer** This response has been prepared for informational purposes only and is not legal advice. The information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Internet subscribers and online readers should not act upon this information without seeking professional counsel. You should consult an attorney for individual advice regarding your own situation. Do not share confidential information until you speak with an attorney one on one and get authorization to convey any confidential information.

  2. Ayuban Antonio Tomas

    Pro

    Contributor Level 20

    Answered . Either an LLC or a subchapter S corporation should work well for you.

    THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. Answering this question does not create an attorney-client relationship or otherwise require further consultation.

  3. Charles Edward Mcwilliams Jr.

    Contributor Level 14

    Answered . I would be inclined to go with the limited liability company (LLC) suggested by the other attorneys. If you are single and no one else has an interest in the rental property a single member LLC is very simple to administer (no additional tax returns are required) and is probably the best choice, but you should get with a local attorney and get them all the facts so they can help you choose an appropriate ownership structure.

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    DISCLAIMER: THE INFORMATION PRESENTED HERE IS GENERAL IN NATURE AND IS NOT INTENDED, NOR SHOULD IT BE CONSTRUED, AS LEGAL ADVICE. THIS POSTING DOES NOT CREATE ANY ATTORNEY-CLIENT RELATIONSHIP BETWEEN US. FOR SPECIFIC ADVICE ABOUT YOUR PARTICULAR SITUATION, CONSULT A QUALIFIED ATTORNEY.

  4. Henry Daniel Lively

    Contributor Level 20

    Answered . I agree with the other attorney. Just stay away from owning rental property with a C-Corp.

    Any individual seeking legal advice for their own situation should retain their own legal counsel as this response provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.

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