Tax Classification for LLC

Forum|Forum|2 years ago
November 24, 2023
1 reply
0 views

Hello
Seeking advice on Tax Classification.

I am a new Real Estate Investor, and the home I bought is owned under an LLC.

I live in California and the LLC is in Indiana, where I bought the rental property.

I would like the homes I buy to not affect my personal Debt to Income Ratio.

I'm opening a Business bank account. Should I do my tax classification under 'Sole/Individually Owned' or as a ' C Corp'? I would like to know the pros/cons of each.

I hope my question is clear.

Thanks

Lawrence

Anonymous_

Level 15

Your LLC is treated as disregarded for federal income tax purposes unless you make an election to be treated as either an S or a C corporation (so it is the same as having a sole proprietorship as far as the IRS is concerned).

Frankly, you should consult with a local tax professional and/or legal counsel.

Mike9241

Level 15

The issue I see is the mortgage if you convert the LLC from a sole proprietorship to a C-Corp.

Would the mortgage remain your liability or could it be transferred to the Corp without tax issues?

Would the mortgage company be okay changing to a C-Corp with this or would they have the right to call the mortgage?

other issues with a C-corp any profits or losses remain in the Corp. They do not pass through to the shareholder. with profits there would be a tax at the corporate level and upon eventual liquidation of the C Corp there would likely be another tax at the personal level.

Mike9241