Disregarded LLC (Single Member) Versus Partnership For Rental Real Estate

In this video, we are talking about utilizing a disregarded LLC (disregarded LLC) versus a partnership for rental real estate.
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ABOUT CLINT COONS
Clint Coons, Esq. is one of the founding partners of Anderson Law Group, Clint has grown his legal and tax firm to over 400 employees by assisting real estate investors with creating and implementing solid entity structuring plans. His success in these regards is in large part due to his personal investing experience. A successful attorney, real estate investor, and speaker, Clint has used his innovative and dynamic strategies coupled with knowledge borne from experience to help thousands of people save millions of dollars and build real wealth.
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The information provided in this video should not be construed or relied on as legal advice for any specific fact or circumstance. Its content was prepared by Anderson Business Advisors with its main office at 3225 McLeod Drive Suite 100 Las Vegas, Nevada 89121. This video is designed for entertainment and information purposes only. Viewing this video does not create an attorney-client relationship with Anderson Business Advisors or any of its lawyers. You should not act or rely on any of the information contained herein without seeking professional legal advice.
#disregardedllc #llc #partnership

[@ClintCoons]

Learn about Real Estate & Asset Protection at our next all-day free live stream. Our attorneys and specialists will answer ALL questions: 👉 Save Your Seat: aba.link/w0a

[@joenetzel1591]

This guy is legend

[@ClintCoons]

Thank you. :)

[@khackney86]

Clint you are the man….great educational video

[@ClintCoons]

Thanks

[@victorscarpulla2478]

Great Info. Just the subject I needed some info on. I will set up an appointment some time soon. Thank You!

[@ClintCoons]

Please do!

[@richruelas]

Thank you Clint for that breakdown.

[@ClintCoons]

You are welcome. Thanks for watching.

[@nvlla11]

this guy is the goat.

[@organizer14]

Super great education, thank you very much!!!

[@ClintCoons]

Glad you enjoyed it!

[@clr2991]

Loved this. Thanks

[@ClintCoons]

Glad you enjoyed it!

[@gabrieldineros587]

You're God sent clint thank you.

[@ClintCoons]

Glad it helped

[@tommytrillions9552]

this is fire

[@aamirayoubel-bey]

Great info!!

[@ClintCoons]

Thanks.

[@mgmtcp]

Great video as always. I think it’s best to work with a CPA and avoid the Disregarded structure especially if you have multiple properties. Keep personal tax and business tax separated.

[@ClintCoons]

Great tip!

[@francescazela3969]

✅ great video! 1) if we set up a partnership manager-managed WY LLC, are the property state member managed LLCs then disregarded entities once more since now they are single member LLC (owned by member WY LLC)? 2) if you live in MD > create a WY LLC to be the owner of property LLCs> create a FL property LLC (owned by WY LLC)> buy real estate in FL LLC name…..am I messing up because I don’t live or operate any business in WY? Do I have to pay franchise tax in both MD and FL?

[@BillCoSmith]

Thanks

[@daveandaya4626]

Is great video and love it very educational and lots of information. Questions Mr Coons i will file a Taxes as a partnership under my current LLC But There is no income yet due to long vacancy plus the tenant not paying because of pandemic eviction rules. How works the K1 if no income? but there is expenses like interest and county taxes, utilities and some repairs?

[@ClintCoons]

Your k-1 will show a loss

[@veronikao3276]

I am binge watching all videos...Very powerful and well delivered content... How do you set up minor child as your partner under holding company? As a trust? Wouldn't having that trust eventually break anonymity through public loan records? Thanks

[@ClintCoons]

I would not but if you did then hold the interest in a trust with you as the trustee and the child as the beneficiary.

[@ag7279]

I need to get a hold of you.. 👍🏼

[@ClintCoons]

If you would like a FREE 30-minute consultation, you can request one here - aba.link/30minSession

[@Simple_Finance]

Hi Clint! Excellent material. Same structure but the parent company instead is an LLC (taxed as S-Corp) and it owns the individual disregarded LLCs, and it would then file 1120S tax return. Appears it can also achieve same result. What’s your opinion on this on having the parent company an S-Corp instead ? Thanks.

[@ClintCoons]

It works up to the point where you want to take excess depreciation (you need basis which can be an issue especially if you refinance) or if you pull an asset out of your structure it will be a taxable event.

[@jgood550]

Clint, I love your content. Please keep up the good work. There is however one complicating factor that you did not address. IRC 721(a) states that a contribution to a partnership that is used to hold investments is treated as a sale of the property to the partnership by the contributing partner. IRC 351 states that if 80% of the assets it holds are for investment purposes, it is an investment partnership and therefore subject to IRC 721 (a).

[@ClintCoons]

351 applies to corporate tax treatment. Also if you own and control the entity it is a non issue.

[@humangoodness]

Thank you. Will the anonymity be blown if file tax using either Schedule E or K?

[@ClintCoons]

No

[@terrycrawford6740]

7:57 Are there tax ramifications by having the rentals now appear on page 2 of Schedule E when they were in page 1 of Schedule E last tax year?

[@ClintCoons]

No its still the same.

[@brad265]

What about increased chances of audit since it's a change?

[@Ascension_iq]

🔥🔥

[@melhoresprodutos8899]

Very good video Clint, I'll like know if one this members can have 100% and other 0% i ask you this because I went to a forum on the subject and one person said that he opened an LLC Partnership with 2 partners, being that the Managing Partner will have 100% of the company and the other partner will have 0% of the company, so I ask you: can that be right? no future problems?Being allowed this, with respect to form 1040 both have to fill out or in the case of having a business with a partner with 0% would be dismissed?Grateful for your attention, tile excellent weekend.😎

[@ClintCoons]

Depends. If the other members have a profit interest then it could work. Not sure what type of interest the other partners held but if its just 0 then no way.

[@maxperez8193]

This pertains to your Trust video. Can a land trust under a partnership LLC in a non community state for a married couple do a 1031 exchange?

[@ClintCoons]

A trust holding investment property can qualify for a 1031. Best to consult with a CPA before you engage in such a transaction.

[@tommytrillions9552]

in the example of 1040 pg1 vs pg 2, you say they give you full credit for the income on your underwriting but this is now a commercial loan rather than a personal loan correct? so you are trading off that 25% higher income for possibly worse loan terms (interest rate, callable period, amortization time line, etc.) in theory, correct?

[@ClintCoons]

No it is still a residential loan but it is how the underwriter calculates income reported on your 1040.

[@hershchaudhari1648]

When you set up the individual property LLCs as Disregarded, and they are all owned by your Partnership WY Holding Company, does each of the property LLCs have to file a return, or do they simply roll up into the WY Holding Company 1065 return, which then goes to your personal return in the form of a K1?

[@ClintCoons]

Everything rolls up into the WY holding LLC.

[@whymindsetmatters]

Would I set up the partnership corporation that holds my rentals in Wyoming as well? Great stuff!

[@ClintCoons]

yes

[@whymindsetmatters]

@@ClintCoons Thank you!

[@CodyGuy81]

Clint I have a question, in Michael Bowmans book How to Start and Run Your Business The Right Way, he says business owners in a partnership have no corporate-veil protection. Wouldn't that defeat the purpose of having a Wyoming LLC as a holding company for investment property or rentals in disregarded LLCs owned by the holding company? Thanks

[@ClintCoons]

I think he meant if you are not using a WY LLC you will not have the protection.

[@brad265]

In your example of simplifying your clients tax return and triggering an audit, if it were the opposite way, going from disregarded LLC rentals to partnership rentals w k1, could that also raise risk of audit since it's a change? Great video.

[@ClintCoons]

Doubtful for the reasons I mentioned. Fewer auditors of partnerships.

[@kevint6569]

I'm just curious... What happens to the HC partnership if one of the partners dies? Would the surviving spouse have to give some ownership to someone else or another entity? Thanks again!

[@ClintCoons]

The LLC agreement should address this issue via the buyout clause.

[@yingwu2143]

Clint, instead of using a Wyoming partnership LLC to own my local disregarded LLC, which would then hold a commercial real estate property, can I instead have my local disregarded LLC taxed directly as a partnership LLC? Thank you.

[@ClintCoons]

Yes you can but you will need 2 owners in the local LLC to elect partnership tax status.

[@gserranol]

What about liability on the General Partner?

[@ClintCoons]

Correct and that is why you need to use an LLC as the GP.

[@terrycrawford6740]

6:12 For happily married couples, is your best suggestion to have the husband and wife as partners?

[@ClintCoons]

Yes

[@talkingbodyfitness5676]

Can I transfer my deed to an LLC that isn’t registered and hold the deed until I am ready to complete the transfer?

[@ClintCoons]

Are you asking can you deed a property to an LLC and not record the deed with the county? If so the answer is yes. Recording a deed is not a legal requirement for transferring title to real estate.

[@terrycrawford6740]

If this is the case, can one retract a transfer by simply shredding the notarized deed since nobody is aware that it occurred? Of course, I am referring to a transfer between two entities that are both controlled by the same individual.

[@spirosalexiadis]

I currently have a texas LLC for a property. I want to make a multi member LLC structure with my mom to do that property to get it on the 1065. Is that all I really have to do? The LLC already has a business bank account. Do I need a business bank account for the partnership(multi member) LLC as well? Then we pay ourselves dividends? Thanks

[@ClintCoons]

Nothing will need to change with the LLC bank account if you add your mother onto your LLC.

[@evas428]

My WY LLC is currently 100% owned by my C Corp. Does this mean I need to add myself as a member to that LLC?

[@ClintCoons]

Not sure. Was the LLC set up for a flip?

[@syreetamcdonald8669]

Hi Clint. I don't have anyone who is willing to be a partner even for a .5 or .1. In this case, is it just best to go with the disregarded entity?

[@ClintCoons]

Yes

[@The1SimLash]

So who is the Responsible Party on the SS4 for the Utah LLC if it's owned by a partnership? You have to use a "natural person" so the IRS doesn't know a holding company owns that Utah LLC until you file taxes?

[@ClintCoons]

You would be the responsible party.

[@JtotheRizzo]

Thank you for this video Clint! Quick question - I have two LLCs. One is taxed as an S-corp and the other is taxed as a Partnership. I know an LLC can own other LLCs. I also know a "Partnership" cannot be a shareholder of a corporation. My question is, can my LLC taxed as a Partnership be a shareholder/owner of my LLC taxed as a S-corp since they are both LLCs?

[@ClintCoons]

Not at all or your S will become a C.

[@JtotheRizzo]

​@@ClintCoons I see. Can the corporation that you list as a partner in your Wyoming LLC be an LLC tax as an S-corp or should it be a traditional corporation (s or c)?

[@ClintCoons]

@@JtotheRizzo Either one works

[@JtotheRizzo]

​@@ClintCoons Awesome! Thank you so much!!

[@amp7816]

If I own rental property in CA under a WY DisRgrd LLC and also own a CA C-corp set up as a management co., should my WY LLC be Manager Managed or Member Managed? And who should be the Member/Manager? NOTE: My CA C-Corp is owned by my WY Holding Co.

[@ClintCoons]

Manager managed is my preference.

[@yellowbread77]

Thank you for this video. I love how you illustrate as you explain. Make a lot of sense. Question: will this work for California and can avoid the $800/year?

[@ClintCoons]

No but you can use a Wyoming Statutory Trust or land trust to avoid the $800. Check out my other videos. If you would like a FREE 30-minute consultation, you can request one here - aba.link/30minSession

[@prestonvongsachang7370]

If I have a group of friends that have $100,000 each to allocate towards a property, how would I proceed with paying the least taxes? Would c corp work because were using retained earnings to parlay onto another property

[@prestonvongsachang7370]

Proposed business plan v2: 1-shareholders to sign off on the proposed plan before submitting to attorney 2-shareholders to pay attorney fee ($250/hr for 10hrs) 3-shareholders to pre-qualify for loan 4-shareholders to determine investment amount (loan size plus 20% down payment) 5-attorney to confirm/revise proposed plan 6-shareholders to sign off on revised plan & committed to proceed 7-create multi-member LLC partnership for each property 8-Shareholders jointly to apply loan & buy 1st property 9-create another multi-member LLC & register as C corp. 10-C corp to own & manage all rental properties 11-transfer partnership asset/title to corp & use wrap-around mortgage for a short period (say 3yrs) 12-refinance partnership loan once corp has credit & income history 13-C corp to pay property mgmt fee (Preston’s salary), say 20% of rental income. For example, $20K for $100K profit 14-C corp to pay debt/mortgage payments 15-C corp to repay shareholders’ advancement (down payments) over 3 yrs 16-C corp to pay 21% Fed corp income tax & 7.5% state corp income tax on taxable income (after salary, debt payment, depreciation, expenses, etc) 17-C corp to keep retained earnings up to $250K limit 18-use retained earnings to invest in more property 19-if retained earnings exceed $250K limit, pay excess as dividends to shareholders. Shareholder to pay personal income tax Tax for C corp 1-taxable income (after corp salary, debt payments, depreciation, expenses, etc) 2-pay 21% fed corp income tax 3-pay 7.5% state corp income tax Tax for Property manager (Preston) 1-pay 15.3% Fed self employment tax 2-pay 10-20% Fed personal income tax 3-pay 4-5% State personal income tax Tax for shareholders (retained earnings) -no personal income tax Tax for shareholders (dividends) 1-pay 10-20% Fed corporate income tax 2-pay 4-5% State personal income tax Should i go to the attorney to file this, and have my cpa manage my taxes?

[@ClintCoons]

If you would like a FREE 30-minute consultation, you can request one here - aba.link/30minSession

[@prestonvongsachang7370]

@@ClintCoons At this point should I just schedule an appointment with the attorney in Key West Florida so they can manage the operating agreements? Should i go with a disregarded llc first and then c corporation and having it wrapped around

[@sred5856]

If a renter pays $2000, and the mortgage on the property is $2000, without any depreciation and other expenses, the passive income is zero. In this new model, would the K1 only show as if one has earned $24,000 of income. Where is the offsetting expense of the mortgage coming in. Otherwise it doesnt make sense to gift Sam $5000ish in taxes. Assumption: The mortgages are paid out of personal bank. Thx

[@ClintCoons]

The mortgage is not an expense only the interest paid on the mortgage. Thus, if you earn $2,000 and your mortgage is $2,000 ($1,600 interest and $400 principal) then you have $400 in income because the principal payment is not deductible.

[@joerenapdi260]

VT

[@andreykutyushev1153]

I feel like the last paragraph on page 3 would not agree with this strategy. do you have any other suggestions? www.irs.gov/pub/irs-drop/rp-02-22.pdf

[@ClintCoons]

Andrey I read page 3 but I am confused as to the reference you are drawing from my video. Could you give me more specifics?

[@andreykutyushev1153]

@@ClintCoons this plus a partnership definition on the 1065 instruction page seems to indicate that just because you co own a property and merely rent lease and maintain it, it doesn't exist as a legitimate partnership in the eyes of the irs unless you provide services to the tenants.. how would everyday people who join together in a partnership justify themselves to the irs if they were to get challenged on the fact that their partnership is invalid when using this strategy?

[@andreykutyushev1153]

if you and your partner are using the home state llc to collect rents, perform maintenance and conduct business there, if using the same logic as Rev. Rul. 75-374, 1975-2 C.B. 261, i'm assuming it wouldn't constitute as partnership for federal tax purposes

[@ClintCoons]

@@andreykutyushev1153 That is correct. The LLC would be a partnership unless you elect to treat it as a corporation.

[@ClintCoons]

@@andreykutyushev1153 Yes if both of you are members in the LLC