LLC Cash Out / Taxes?
I'm going to start buying doubles, rehabbing and keeping them for rentals. I plan on using an LLC and also cashing out some of the equity (20-30k per double). Whats the best way to handle taxes on the cash out money if I want to "pay myself" some of this money? Would I be an employee of the LLC? I've seen some posts referencing a K1. Would I be a partner? The rental was not sold so its not capital gains right?
I plan on seeing a CPA, but I want to educate myself some first.
I have been buying, rehabbing and selling single family homes for a few years now. No rentals, no LLC, just me myself and I.
It has a little to do with how you set up the LLC and how many members there are.
If the LLC is only you then it will be taxed as if it is not there. The income will appear on your personal tax return.
If the LLC has multiple members and you took the time to organize the LLC in a specific way the income is dealt with as if the members were in a partnership. Again the income just ends up on the personal tax returns. In this case the LLC needs a unique tax ID where in the first case above your SSN is used.
Do speak with a professional. Even if you do not know the rules, just be clear what you want to accomplish and be open to suggestions.
John
[addsig]
If you pull out the equity is it considered income? Or only if the property is eventually sold?
Thanks! That was very helpful