I have a client who owns an S-Corp which provides international shipping. He is thinking about buying a warehouse. What would be the best way to handle the purchase of the warehouse. Would he set up an LLC and have the LLC buy the warehouse then lease it to the S-Corp, that way the warehouse would have some protection if someone decided to sue the S-Corp. Would there be a better way to do it?
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Warehouse-LLC
How would the LLC file? As a C Corp., Sole Proprietor?
For tax purposes you would want the building in the clients name. -
Filing
For tax filing the LLC would file as a sole proprietor. Are you suggesting the client should buy the building himself and not form an LLC?Comment
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The generally recommended method is to purchase the real estate property in a LLC and rent the property to the S-corp (or other business entity) at a fair rental rate. The LLC should setup to be taxed as either a partnership or 1040 Sch-E*** and not as a corporation. This method generally limits the LLC members liability to the assets of the LLC but retains the capital gains attributes of the property if sold. Also distribution of the property to the individual members is a tax-free event in liquidation of the LLC.
***Edit: or 1040 "Sch-C" is changed to 1040 "Sch-E".
thanks Bob for pointing out my dumb error!Comment
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I would........
go with a sinlge member LLC filing on Schedule E. (Rental Income in this case is not a sole proprietorship.)This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
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