Posted by David Krulac on March 25, 2005 at 19:48:04:
rental income earned in Pa. is subject to Pa taxes no matter the form of ownership. In addition “Foreign” corporations and LLC, (of which any state other than Pa is considered foreign) are subject to Capital Stock Tax. It is one onerous tax, which will affect you when you sell the property.
I am neither an attorney nor a CPA, and you should consult one or both.
I would recommend a Pa entity for Pa property for liability purposes. Depending on the value of the property you probably don’t need a seperate entity for each property.
You should have more than adequate insurance and practice safe ownership by reducing your risks of suit.
There are preferred ways to deal with Pa. taxes which a knowledgable real estate CPA/Attorney will know about.
My wife and I were talking to someone yesterday and they reccomended that for reasons of liability protection and tax savings, we should create an LLC for each of the rental properties that we own and then put them all under an S Corp based in Nevada. Having each property in it’s own LLC would give us protection from liabilities, and putting them all in an S Corp would provide us with tax savings they said. According to them, we could avoid paying PA income tax on the rental income this way.
Did this guy know what he was talking about? Is there a better way for us to hold our properties, both for tax and liability reasons?