Did you make the right tax election for your LLC?

I’ve had the honor of supporting business owners and investors in how to properly structure business entities to maximize their asset protection and tax savings strategies. Laws change, taxes change, and keeping your structure up to date is important.

When building out your rental portfolio, there is no disputing LLCs are the very best vehicle. However, the unique element of forming an LLC is the ability to choose how your LLC will be taxed. There are four options:

      C-Corp – 1120
      S-Corp – 1120S
      Partnership – 1065
      Disregarded – 1040

If you’re operating a big business with more than $10M in revenue, or more than 100 shareholders (members), your CPA might want you to be taxed as a C-Corp, in which case your LLC would make the appropriate tax election and you would file form 1120, exactly the same as a C-Corp. If you’re a small business, to avoid double tax, which can happen with the C-Corp, most CPAs prefer you file as an S-Corp, filing form 1120S. If you have a partner, the LLC will file form 1065. And lastly, if you form an LLC as a single member LLC, the IRS automatically considers the LLC “disregarded” for tax purpose.

A couple of very important rules to follow: Never hold rental properties in an entity taxed as an S-Corp or a C-Corp. S-Corp’s lose the “step-up in basis” when you die, leaving your heirs with a massive tax bill. There’s only two ways to get money out of a C-Corp: Salary or Dividends; neither are good and will crush you and your family in taxes.

If you’re a real estate investor, business owner, or both, make it part of your SOP: Set up the LLC, choose the right tax election, and move forward. People like to advise, “you don’t need an LLC, just get a good insurance policy…” I agree, you should certainly carry good insurance. But let’s see what happens when there’s an accident and the insurance company show up with the adjustors and attorneys. Who do you think is going to win this battle?

With NCH, the state’s top business formation service, you can register your LLC in Nevada quickly and easily. Our specialists will help you choose the right entity for your company and understand why an LLC in Nevada is your best option. We’ll assist you with all necessary Nevada LLC forms, including the vital Articles of Organization, and help you comply with state regulations. In addition, we offer expert assistance with tax compliance, credit building, and payroll management. Schedule a private consultation to explore effective solutions to minimize tax liabilities and protect your wealth. Start unleashing your LLC’s full potential today with NCH. Schedule a consultation with Adam Kintigh today!

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.