The Best Business Structure for Real Estate Investors | USTaxAid

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The Best Business Structure for Real Estate Investors

Written by Diane Kennedy, CPA on February 23, 2012


One of our most popular topics at our real estate webinars is business structure. It all starts with knowing what type of real estate investor you really are. For example, are you a real estate dealer, real estate investor, real estate professional, real estate business owner or a real estate investor?

Please check out the free webinar replay at and find out more. (Scroll down to the bottom of the page to see the webinar.)

Once you know that, the next step is the business structure. In a lot of cases, the best structure is an LLC. That brought out a lot of questions. Here are some of the questions we talked about.

Q: I am sole member of 3 LLCs, member managed, I am managing member — 2 LLCs own 1 multi-fam prop each, 3rd is the entity I operate under (alone) to receive rents, manage, maintain, renovate the properties. Do I need to change these to Mangager Managed, naming myself as manager?

Great question! It’s obvious you were paying attention when we talked about the newly proposed regulations by the IRS put in force at the end of 2011. A member-managed LLC or Limited Partnership can mean you lose deductibility of your real estate. Learn more at the webinar at

Q: Is their enough legal cases to make Series LLC safe?

This is really a question that is best answered by your attorney and is based on the cases in the state in which your property is located. Not all states have Series LLC law, but many states have accepted the Series formation from other states. The bottomline answer is “It depends.”

Q: if properties are currently personally held, how do you move them into an LLC without affecting the loan? Many lenders have language in their documents that they can call the loan if ‘ownership’ changes.

This was definitely a concern back in the days of raising interest rates (or concern about raising interest rates.) We haven’t seen as much concern about that lately. Back in the day, the advice was to call the legal department of the lender and explain what you are doing. In every case of which we were aware, as long as the right person was consulted, there was no problem.

Q: Is there any advantage, from asset protection viewpoint, to holding property as a single member LLC?

This is another one you need to check in for the particulars in your state. Colorado, for example, hasn’t been great at upholding asset protection within a single member LLC.

Make sure you check the free webinar replay at

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