Zachary_W
Employee Tax Expert

Get your taxes done using TurboTax

I'd suggest forming an LLC if you plan to bring in capital partners or expand your portfolio of properties. Additionally, consulting a lawyer about liability protections is wise when renting out a residence for profit, as this can safeguard your personal assets. For tax purposes, you might explore qualifying as a Real Estate Professional, which could allow you to offset losses against other earned income. 

 

Other Tax Considerations: A single-member LLC is typically a "pass-through" entity, meaning rental income and expenses are reported on your personal return (via Schedule E), much like a sole proprietorship. However, an LLC offers flexibility, if you add partners or grow later, you can elect different tax treatments (partnership or S-Corp status). 

 

When to Consider an LLC?

  • If you rental business remain small (a single property), sticking with sole proprietorship might be sufficient, especially since forming an LLC may increase costs (annual fees).
  • If you're concerned about liability, plan to scale your property holdings, or want to protect personal assets, forming an LLC could be a proactive step.

Please feel free to reach backout with any additional questions or concerns you might have!

Thank you for joining us today and have an amazing rest of your day!

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer.”

View solution in original post