LLC Owned Property Managed By C Corp
I have an LLC that owns some properties. These properties are self-managed. The LLC doesn't provide the nice benefits that C Corps do; such as Medical and so on. I'd like to setup a C Corp management company to manage mine and others property. I'd pay the C Corp just enough to cover expenses of daily operations and medical plans, so on and so on. There wouldnt be much of a tax obligation at the end of the year. I'd charge my LLC going rates for Property Management in my area. Effectively I'd be moving money from my LLC , as an expense, to my C Corp as income. This is where it is shaky. Im I going to get hit with personal holding company tax? Has anyone done something similar? Any input would be appreciated.
This is a great question and one I've asked before. And, I don't want to hijack your thread or anything but I'd be interested to see how the accounting would work between these two entities.
I am familiar with some investor who purchase their properties in a c-corp and then depending on whether they're holding them as long term holds/investments or flipping them they'll either stick them in an LLC or sell them out of the c-corp, respectively.
Someone else out there *has* to be doing something similar to what we've described here. Please share the gorey details.
What specific benefits are you looking for? I'm not sure that a C corp would offer you many advantages.
Unlike your LLC, C corps are double taxed. If your corp has a loss, it doesn't offset income on your individual return. Depending on your situation, you may create enough of a loss in your LLC to where it's not deductible.
The C-Corp (Management Company) is strictly used to take advantage of the frindge benefits offered to C-Corps. Such as Medical plans(deductions) and a few other. C-corp will not be the money maker; so im not concerned about double taxation. The C-corp will make just enough income to pay the bills.
If the C-Corp does not own the property it is managing, then it is performing a service for a fee. No personal holding company issue that I see.
You may run into a licensing issue with the state real estate commission. Some states require a professional property manager to have a property manager license, others require a real estate broker license.
In general, C corps do not provide any advantages to a small business. You would probably save yourself a lot of headaches by considering a S-corp or just a sole-proprietorship.