LLC or LP which one better for rental properties

From what I understand (not a CPA or Lawyer)one is no better than the other, it just depends if you have a partner (LP) You will need to purchase the property in your LLC or transfer it after purchase to your LLC or LP. You will transfer the property into your LLC at the same amount as the purchase price, in order to not have to mess with taxes (capital gains). The point is it is NOT a sale it is a personal tranfer from you to you the owner of the LLC.

Hope that helps

p.s I wouldnt hold more than a2-5 properies in one LLC beacause if there is an issue with one property they can attack all prperty values inside that LLC. The point is dont put all your eggs in one basket
Craig

RDalhouse, I have a problem with putting rentals into an LLC because when the income is taxed, it will be taxed as self employment income if you chose to report your income on a Schedule C. Rental income should be reported on a Schedule E. By filing a Schedule C, you are going to be taxed the regular income tax on profit and the 15.3% self employment tax on profit as well, where as filing a Schedule E you would not pay self employment tax on that.

Brian

Hey guys...

Some very good points by all. As Craig said, they are essentially the same thing for the most part and there aren't a ton of differences. It all comes down to how you treat it for tax purposes! Brian, also mentioned some good points as well by being able to file on a schedule e. The main thing is to get some good solid advice about all the entities and find what works best with your situation so I recommend sitting down with a professional and reviewing all your options.

When it comes down to it, a LLC for example, can be filed many different ways from a tax perspective. For instance, if only one person owns a LLC, it is then considered a "disregarded entity" which means you simply report the income on your personal income tax return. Some would ask, then why an LLC? For many, it is just for the added layer of liability protection... In the case of a disregarded entity, it would be filed as a schedule c, or for rental property purposes as Brian brought up, it would be filed under schedule e. So that solves the problem there... But let's say that the LLC has 2 partners. A LLC is usually filed as a partnership return inititally, but you can make an entity classification change and have it actually be taxed as a corporation. Taking that one step further, you could then actually make the election to treat the corporation as an S-Corp. Whew.... Did you get all that?? Like I said, there are many things to consider and it can be set up, for tax purposes, one of many ways! Just got to figure out what is the best individual situation for yourself.

Hope that sheds a little more light into the world of LLCs, LLPs, etc.

Take care guys and the best of luck on your REI endevours!

Thanks Robert for your expertise on the subject. It helped clear some things up for me as well as others I'm sure. It sure sounds like it could be complicated.

Thanks again,

Brian

Hey.... Well I don't think I'm an expert on the subject, but glad to hear it helped out a little. Like I mentioned, just make sure you do your due diligence before finally selecting the proper entity for your specific situation...

Take care everyone and have a great weekend!