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Paying Yourself Rent (via Corp)

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    Paying Yourself Rent (via Corp)

    I have a small chiropractic firm as a client. The owner recently incorporated (LLC; Sub S).
    He is the only member of the corp. I was wondering how appropriate it would be for the corp to pay him rent. He owns the building and it is paid for.

    This would save a little money on the SE tax.

    Anybody have any experience with this?

    #2
    RENT to S Corp

    I'am not sure here how this scenario would save money on the SE tax. True the rent expense on the LLC/S Corp would lower the taxable profit, but that profit is not subject to SE tax. So I wonder if this paying of rent is an excercsise that yields no benefit?

    Comment


      #3
      Rent

      Your post is not exactly clear as to ownership of the building, but I assume he owns it as an individual and would be reporting expenses as commercial rental property on 1040 Sch-E. Therefore he should have rent income from the LLC to report against the expenses. Normally the only challenge from IRS on the rent expense is when a C-corp is paying an individual more than FMV rent or the S-corp is not paying a reasonable salary. SE tax is really not an issue.

      In my state an LLC (that has elected to be treated as a S-corp) is still a "company" (LLC) and is "organized" rather than "incorporated" as that term is only for entities organized under corporation laws. Is that the case in other states or do they call LLC's corporations?

      Comment


        #4
        LLC/Corp.

        It is my understanding that a LLC is always a company for the state. A lot of people say mistakenly corporation.

        If LLC chooses to be taxes as Corp. it affects tax treatment only and doesn't alter the status with the state in any way.

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