Sub S - LLC
We currently have a sub s corp that has been active for 8 years, consulting business. I am currently getting an LLC set up for long term hold commerical property.
My question is, if I want to also buy fixer up homes and resell once they are fixed up. Could I buy those through our current sub s that is used for our consulting business? Or should it be set up as a separate sub s?
Reason I ask is my understanding is use LLC for long term and a sub-s for rehabs.
I view LLC's like chicken soup: "Can't Hurt".
Your suggested decision tree for whether something goes into the Sub-S or the LLC is sensible from the perspective of a situation where there is no possibility that anything going into the Sub-S will be a long-term hold that at some point in the future you will want to drop out of the corporation into your own name.
You see, no corp can liquidate tax free. That means that you can't get a property out of it without paying tax. With an LLC that has partnership tax treatment, the situation is different, and you could take a property out ... and pay no immediate tax. Its basis in your hands would be the same as its basis in the LLC's hands ... and the gain would continue to lurk therein until you sold it. It could be a useful benefit. But if you're sure you'll never need it, go ahead and put the rehabs in the Sub-S.