Should I form an LLC?

What is the name of your state? Ohio

I want to start buying and renting single family residential houses. Should I create an LLC to protect my personal assets? Or should I form some other type of entity? Assuming that I go with the LLC, do I need a separate Employer Identification Number. I will be the only official owner/employee of the company, but my wife will help me with the marketing, back ground checks, etc.. Looking at the IRS Instructions for Form SS-4, it states (on page 4) that "By default, a domestic LLC with only one member is disregarded as an entity separate from its owner and must include all of its income and expenses on the owner's tax return (e.g., Schedule C (Form 104)). It also says, "A single member domestic LLC that accepts the default classification (above) does not need an EIN and generally should not file Form SS-4. Generally, the LLC shold use the name and EIN of its owner for all Federal tax purposes".

I hate when it says "generally". If I go with the LLC do I neet a separate EIN?

Any help is greatly appreciated.

weidnerk

[abezon]

These are 2 separate issues: whether to incorporate & how you want to handle tax reporting. You incorporate if you are concerned with personal liability stemming from your business activities. Possible liabilities for landlords include getting sued from someone being injured on your property, toxic mold problems, lead paint lawsuits, etc. Some form of liability protection is probably warranted if you're going into the landlord business.

Many landlords I know form a separate LLC for each rental property so that property B is not at risk if something goes wrong at property A. Whether you form 1 LLC or 7, you'll need to be scrupulous about maintaining the corporate "forms" -- keeping minutes, *maintaining separate books*, not mixing LLC money with personal money or another LLC's money, filing the required state forms annually, etc. You can get an EIN for each LLC, which might help you keep things straight, but it's not necessary. Failure to follow the forms can result in the LLC being disregarded for liability purposes, negating all the protection you thought you had.

Taxwise, an LLC is a corporation & a separate legal entity, so technically it needs to file its own tax return each year & issue K-1s to the members to pass through the income & expenses. However, LLCs are so popluar with sole proprietor-type businesses that the IRS issued a revenue ruling that 1-member LLCs do not have to go through all that rigamarole every year. Instead, the one member can just report the income & expenses directly on a Schedule E (Sch. C if a business). [Multiple-member LLCs are taxed as a partnership or corporation & file a corp/p'ship return each year.]

Originally Posted by abezon

Taxwise, an LLC is a corporation & a separate legal entity

Actually, an LLC is not a corporation. It is an unincorporated entity that happens to provide the same limited liability protection as provided by a corporation. It is always considered a pass-through entity by default for tax purposes (taxed as a sole proprietorship or partnership). It is only treated as a corporation for tax purposes if a special tax classification election is made (and the election can be made by both single-member and multi-member LLCs).

I agree that, in the case of an LLC, an EIN is optional.

Holding property in an LLC presents unique benefits over other forms of entities, including tax and estate planning advantages. Here's an article that talks about the aspects of holding property in an LLC:

[url]http://www.mynewventure.com/?show=RealEstateLLC[/url]