Building in seperate LLC

[Crusher]

Those who own their own buildings, do you have them in a separate llc or the same as the business? I used to work for a restaurant that had The business as lets say ABC Kitchen and the property was owned by XYZ Properties, both the same person.

 

[paul7979]

Mine is in a separate entity. I would hate to lose both to an ambulance chasing attorney over a single issue. My building has 5 storefronts and at some point I hope to sell the pizza business without the real estate.

 

[bigmoose]

It is good to separate capital assets from the operating entity in order to segregate and manage risk. Our CPA/Attorney recommended this for our construction business, years ago. The heavy equipment was owned by LLC “A”. LLC “B” was the operating entity who leased the equipment from LLC “A”. All had the same owners (members).

 

[bodegahwy]

We operate our business in an S-corp (same liability protection as an LLC but with tax benefits for the way we do things) and hold the property in a separate LLC. The property LLC receives rent from the S-corp which is passive income. Having them separate also allows us to decide where we want to earn the income to some extent.

Separating them also might provide a wider array of options for working with investors or partners. We don’t have any but I have seen that done successfully.

 

[Piedad]

I also agree that separate LLC’s is the way to go. Another reason is that you may one day decide to sell the business, while continuing to be their landlord. The sale could also be contingent on them executing a lease extension (or even a new lease) to provide for a long-term tenant.

 

[Crusher]

I have a new llc filed with the state for the property, so next question… Should I use my personal SSN or get an EIN for the property side. My bank said it should be fine to just use my SSN. I will be receiving income from another tenant, but will not have any payroll specifically for the property.

 

[bigmoose]

http://www.nolo.com/legal-encyclopedia/does-single-member-llc-need-ein.html

"As a sole proprietorship doing business through an LLC, you do not need a separate EIN number unless you have employees or are required to file excise tax returns. By default, owners of single-member LLCs report the business profits and losses from the LLC on their personal tax returns using their own Social Security number or tax identification number. Owners of single-member LLCs are not required to have separate EINs because they are not considered employees of the LLC by the IRS. However, if your single-member LLC has other employees you are required to obtain an EIN and file employment taxes.

"Other Considerations
Outside of federal tax considerations, there are other reasons why you may need to obtain an EIN. First, most banks will require you to obtain an EIN if you wish to open a business account in the name of the LLC. Second, many companies with which you do business may require you to have an EIN in order to process payments. Finally, some states may require LLCs to report income on state tax returns using an EIN. It is important to consider these factors as well as the IRS requirements when determining whether you need an EIN for your single-member LLC.
…said better than I could.

 

[GotRocks]

Our actual business is an S-Corp,
the property holding company is set-up as an LLC. It was explained to me why it is good to separate the two, but forgot why…

 

[bodegahwy]

Our actual business is an S-Corp, the property holding company is set-up as an LLC. It was explained to me why it is good to separate the two, but forgot why…

A pizza place is a business which earns active income. As active income ALL profit would be subject to either social security or self-employment tax without the S-Corp election.

Collecting rent is investment/passive income and not subject to FICA or S.E.T.

There are also differences in how profit can be allocated to the owners of the entity. In an S-Corp, the profit must be distributed proportionately to ownership… i.e. if two owners own 70% and 30% respectively and the profit of the S-Corp is 100K the division reported will be 70K and 30K. In an LLC (like a partnership) profit can be assigned disproportionately to ownership if the members choose to do so. This can be useful in setting up a deal with an investor.

 

[pizzanow]

My bank required I get an EIN for the llc I hold my property in. It only takes a few seconds on the irs website to get one. I think you would want to keep things as separate as possible.

 

[bodegahwy]

My property LLC also has an EIN.

 

[royster13]

Just make sure the building and each and every business located in the building has liability insurance…Each jurisdiction may be different but in some locations if a business owner does not have adequate insurance it may carry over to building owner on a joint and severally liable basis…

 

[royster13]

Just make sure the building and each and every business located in the building has liability insurance…Each jurisdiction may be different but in some locations if a business owner does not have adequate insurance it may carry over to building owner on a joint and severally liable basis…

 

[bodegahwy]

Just make sure the building and each and every business located in the building has liability insurance…Each jurisdiction may be different but in some locations if a business owner does not have adequate insurance it may carry over to building owner on a joint and severally liable basis…

At least where we are located, if the property LLC and the business entity have identical ownership you can have a combined insurance policy. But if you have other tenants in the building Royce is right, make sure the lease requires adequate insurance and that the property ownership is a named insured on their policies.