Single Member LLC- SMLLC

11/11/2019

You’ll find much beauty and little beast in using a single-member LLC for your real estate ownership.

Should you use a single-member LLC as a real estate ownership vehicle?

That might be a very good idea.

Under the so-called check-the-box regulations put out years ago by the IRS, you can generally ignore the existence of a single-member LLC for federal tax purposes.

The exceptions are

when you elect to treat a single-member LLC as a corporation for federal income tax purposes (relatively unusual), and
for purposes of most federal employment taxes and certain excise taxes (see Sidebar 1 below).

When you choose not to treat a single-member LLC as a corporation for federal income tax purposes, the single-member LLC has disregarded entity status for those purposes, and we will call it a “disregarded single-member LLC.”

The federal income tax treatment of a disregarded single-member LLC is super-simple because its activities are considered to be conducted directly by the single-member LLC’s sole member (owner).

For instance: When an individual (like you) uses a disregarded single-member LLC to own rental real estate, you simply report the federal income tax results on Schedule E of Form 1040. You need not file a separate federal income tax return for the single-member LLC.

You get the idea. This is easy!

Although you ignore a disregarded single-member LLC for federal income tax purposes, it is not ignored for general state-law purposes.

Therefore, a disregarded single-member LLC will deliver to its sole member (owner) the liability protection benefits specified by the applicable state LLC statute. The liability protection benefits are usually similar to those offered by a corporation.

The bottom line. With a disregarded single-member LLC, you get super-simple tax treatment combined with corporation-like liability protection. This happy set of circumstances opens up planning opportunities in the real estate arena.

If you would like to learn more about how the single-member LLC for your real estate investments can work to your advantage, book a Business Consultation today!

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Important Disclosures

Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.

Keana founded this website and decided and created this blog page to offer a space for those seeking knowledge to understand, however not to be confused with advice or planning strategies.

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