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Tax Benefits<br />
From a tax<br />
perspective, and<br />
LLC<br />
formed with two<br />
or<br />
more members is<br />
classified as a<br />
“Pass-Through<br />
Company.” A<br />
“Pass-through”<br />
means the<br />
income is passed<br />
through to its<br />
owners and<br />
claimed on those owner’s individual tax returns. The LLC is subject only to<br />
capital gain rates on the ownership shares of the member, and not to the<br />
corporate capital gains taxes, therefore no double taxation. LLC’s with just one<br />
owned-member however, are taxed as a sole proprietor, and no separate tax<br />
return is required. Actually tax dollars from holding real estate in an LLC<br />
opposed to personal holding the properties is zero. As of 2011, if you own<br />
income property and actively participate in the management of the property<br />
in your adjusted gross and less than $100,000, you can write off up to $25,000<br />
of rent losses. The amount of the rent losses that you can write off is<br />
proportionately phased out between 100,000 and 150,000. Also, remember<br />
that although the loss is disallowed for that particular tax year, it is not<br />
completely lost. When you sell your income property, you can write-off any<br />
unused rental losses that have accumulated while you have owned the<br />
property.<br />
The Disadvantages of having an LLC<br />
Up Front and Ongoing Expense<br />
When setting up an LLC, there are costs involved that are generally<br />
charged <strong>by</strong> an attorney or tax accountant for the preparation of your LLC<br />
charter. Those fees can vary depending on the source but is highly<br />
recommended versus doing it yourself online. Depending on what state you<br />
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