Author Topic: Forming an LLC to Manage Real Estate  (Read 141 times)

Tim

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Forming an LLC to Manage Real Estate
« on: April 21, 2017, 01:24:55 PM »
My wife and I own two rental properties. We have a positive cash flow so I would like to shelter that revenue. Since my wife actually manages the properties, can she form a sole proprietorship or LLC that we pay to manage the properties?

If so, I would then have all that revenue go to a SEP IRA that I would set up for the company. If not, any other suggestions on sheltering the positive cash flow that don't involve me spending money to incur additional expenses?
« Last Edit: April 22, 2017, 07:43:41 AM by Tim »

KeithTax

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Re: Forming an LLC to Manage Real Estate
« Reply #1 on: April 24, 2017, 07:59:39 PM »
Real estate is passive income no matter what you do (with the exception of organizing as a corporation and taking a wage). You can own your rentals in an LLC but it will not allow additional retirement contributions. Sorry.

Tim

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Re: Forming an LLC to Manage Real Estate
« Reply #2 on: April 25, 2017, 08:22:59 AM »
Thanks Keith, but that is not quite what I meant. I'm trying to separate ownership from management. Specifically, is it allowable for my spouse to form a separate property management company that we in our personas as owners of real estate could then hire to manage our properties? The properties would not be put into the same corporate structure as the management company. My understanding is that an owner cannot be paid for his or her labor, but does a separate management company that happens to be owned and run by one of the property owners face the same restriction?

By the way, loved the post http://wealthyaccountant.com/2016/02/19/retire-early-with-rental-properties/ It helped clear up some confusion I had over the repair safe harbor rules.