Posted by J Patenaude on December 02, 2004 at 11:24:17:
I forgot to mention: New Jersey
Existing S Corp vs New LLC - Posted by J Patenaude
Posted by J Patenaude on December 02, 2004 at 11:16:09:
My wife and I have an S Corp – we lease our business property and are about to purchase it. Is there any good reason to form a new LLC just to hold the real estate or is the S Corp an adequate entity? Thanks
Re: Existing S Corp vs New LLC - Posted by Frank Chin
Posted by Frank Chin on December 04, 2004 at 04:44:51:
J. Pentenaude:
I would form an LLC to hold the property.
1- For asset protection reasons, should your business go downhill, the RE asset would be separate.
2- When you sell the business some day when you retire, you would have the option of selling the buiness only and keeping the RE separate, and collecting rent.
3- By keeping them separate, your S Corp should pay rent to the LLC. But by doing so, you’ll establish some value for the property at the time that you’ll want to sell the property.
Frank Chin
Re: Existing S Corp vs New LLC - Posted by Rhino
Posted by Rhino on December 03, 2004 at 19:39:07:
This might work, but check with an attorney and your accountant on this: buy the property in an LLC, then have the S Corp lease from the LLC. Look at from a liability protection and tax saving perspective.
Large corps do this so why not us…
Re: Existing S Corp vs New LLC - Posted by eric
Posted by eric on December 02, 2004 at 13:18:30:
An S-Corp is not a good choice as an entity for holding property and passive income activities. If more than 25% of the S-corp income is passive, than the S-election will terminate. In that case, it will default to a C-corp. If more that 60% of a C-corp’s income is passive (I believe this is measured over a 3-year period), and less than 5 sharholders own more than 50% of the corp, then it will be deemed a personal holding company and subject to an additional 15% tax by the IRS above the normal income tax.