Advice on separating income

[sknayar]

Hi,

  I work full time for a company and I also have some investments.  One such investment is through a firm from which I receive schedule K1. I also have a mobile home which is managed by a management firm and I receive payments on promissory note. Should I be creating an LLC with all these investments in it to separate out taxes and provide the ability to expense management fees and such. I have been including all these incomes(not adding up to a lot) in my personal tax returns. Is there a benefit in creating an LLC and maintaining it for the investments I have. If so, how do I go about it? Thank you for taking time to answer my question.

Sincerely,

Satheesan Nayar

[NateTheGrEAt · Accepted solution]

Creating a single member LLC (in other words, one which is 100% owned by you) does not impact your tax situation in any way. A single member LLC is by default considered a "disregarded entity", meaning that for tax purposes, you treat the income in the same way as if the LLC did not exist. 

An LLC with one owner can elect to be taxed as a corporation, but this is generally not optimal for an entity that holds passive investments. This would also require you to spend the time and money to file an additional tax return for the corporation every year in addition to your personal tax return. 

If you are paying management fees for your mobile home these can be expensed on Schedule E on your personal tax return. It is not necessary to create an LLC for this purpose.