I been researching on how to form a LLC in the state of California.

Let me give you a scenario and see if you can toss your 2cents.


An investor wants to purchase a rental property and buy it under the new LLC name that he recently formed.
The investor collects monthly rent and pays the property tax.
Since it is a LLC, the investor would need to file a separate tax for the residual income?

It depends on how many members the LLC has.

If "the investor" is the only member (similar to an officer of a corporation) of the LLC, then it is a "single-member LLC". Those are regarded as pass-thru entities by the IRS, and you do not need an additional tax return, tax ID, or anything.

If you have more than one member, it is a multi-member LLC, and you will need a Tax ID number, file a return, and have the income passed to the members by a form K-1 every year.

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Richmond Realtor

Richmond Real Estate Investor Association REIA

What would be the answer if this dealt with a husband and wife, filing jointly?

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285 Columbus Lofts - New 63-unit Boston loft development in the former Red Cross building
FP3 Boston Condos - FP3 Fort Point Channel Boston Seaport Condos
Court Square Press Lofts - High-end luxury amenity loft building in South Boston featuring 130 condos

If the husband and wife are both members of the LLC, then it is a multi-member LLC, and the LLC will need to file it's own taxes.

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Richmond Realtor

Richmond Real Estate Investor Association REIA

CafeMonkey, sorry, don't know your real name...sounds like you are heavily involved in Richmond investment real estate, this might be a good place to throw out the advantages, and perhaps some disadvantages, of owning real estate under an LLC, or perhaps in this case, a single LLC per property.

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285 Columbus Lofts - New 63-unit Boston loft development in the former Red Cross building
FP3 Boston Condos - FP3 Fort Point Channel Boston Seaport Condos
Court Square Press Lofts - High-end luxury amenity loft building in South Boston featuring 130 condos

Advantages: Asset Protection and Some (limited) privacy

I can't think of any disadvantages, except a little more paperwork and procedure. Unless you're in California, where an LLC is $800 per year.

I recommend an LLC for rental property, and an S-Corporation for flips and rehabs.

A single LLC per property doesn't give you much, except the assets are seperated from each other for liability purposes. I wouldn't think this would be worth the hassle, unless you were dealing with high-risk properties (like low-end rentals).

If you're serious about owning property in an entity, I HIGHLY recommend Dyches Boddiford's classes. He has an LLC and Corporation class coming up soon.

And always have an umbrella liability policy. It's cheap, and it covers a ton of stuff that might fall thru the cracks of other policies.

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Richmond Realtor

Richmond Real Estate Investor Association REIA

i wonder if this has anything to do with what the IRS published on the dirty dozen.. the corporate sole. be careful i have had a friend loose 50k who was promised the deed to their home plus cash in a year that when they were ready to refi-- no way be able to. guess what the corporate sole is a scam... 50 k lost the lender got paid in fees, a bogus mortgage that was given with a pre pay and all principals are gone..

What the heck are you talking about?

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Richmond Realtor

Richmond Real Estate Investor Association REIA