Filing a Tax Return for a Series LLC with Real Estate Investments

I recently received a question from a real estate investor who was considering a Series LLC for real estate investments and was confused about how the tax return would work.

The Series LLC is now authorized in every state, although there are some states you might want to avoid. (California is one of those states.)

The Series is set up with a ‘mother ship’ which then has subsidiary cells that are set up under the mother ship. Each of these cells can then elect how they want to be taxed. They could elect to be S Corporations. They could be C Corporations. However, if they will hold real estate, there is usually is a different strategy to be used with the Series.

For example, if you have 4 properties, you may want to set up 4 individual cells. These cells could then be owned by the mother ship. The cells are considered disregarded entities and so it just rolls into the mother ship. There is only one return then that needs to be filed. If the main Series is owned by just one person, it will actually all end up on the Schedule E. If the main Series is owned by more than one person, you will need to file a partnership return.

Because of the unique set-up available with a Series LLC, a real estate investor gets the best asset protection, separating each of the properties, with no additional state fees or filing needed and only one return for all of them.

We work with Megan Hughes at Smart Business Incorporation for all of our clients’ Series LLC set-ups. She understands real estate, real estate investors and the unique uses with a Series LLC.