Book: Your Best Business Entity For Real Estate Investing

“Your Best Business Entity For Real Estate Investing: LLC, S Corp, C Corp, Partnership, or DBA?” By Michael Lantrip

• “But liability is the main reason for not operating as a Sole Proprietorship. The Sole Proprietor is responsible for all obligations of the business.”
• “The Sole Proprietorship and the General Partnership forms of business are the only ones in which there is no protection from personal liability for the owner. But at least, with the General Partnership, you can be an LLC as a Partner, and create your personal liability protection.”
• “And don’t fall for the claim that you can protect yourself with ‘an umbrella insurance policy’ for a few hundred dollars. In the first place, the premium is a lot more than that. Second, the deductible is so high that you could end up with your insurance company reaching a settlement that you will pay most of. Third, the Exclusions in the policy are usually the exact things that you would be accused of in the lawsuit, so the insurance company can easily, and legally, deny coverage, even if the allegations are false. Fourth, and finally, an insurance policy is often a magnet for unprincipled individuals and lawyers because they know that there is a certain amount that the insurance company will settle for because the amount is lower than their legal costs of fighting the lawsuit.”

LLC

• “The LLC is the best thing to happen to Real Estate Investors since the creation of the Subchapter S Corporation which made it possible to have the protection of a C Corporation without the double taxation.”
• “If you are flipping properties, you are not investing. Flipping properties is operating a business, with inventory, and you are a dealer.”
• “An LLC is usually formed by filing Articles of Organization with the Secretary of State of your State.”
• “The information required in the Articles of Organization will vary, but will certainly include: 1.) Name of the LLC. 2.) Address of principal business. 3.) Name(s) of the Member(s). 4.) Name and address of the Registered Agent. 5.) Whether the LLC will be managed by Members or by Managers.”
• “There are nine States with Community Property laws. 1.) Arizona 2.) California 3.) Idaho 4.) Louisiana 5.) Nevada 6.) New Mexico 7.) Texas 8.) Washington 9.) Wisconsin”
• “The Registered Agent is someone, or an Entity, that will be served with the copy of the lawsuit if you are ever sued.”
• “The Registered Agent’s office can also serve as the LLC’s “corporate headquarters” if you don’t have an office in the State of formation.”
• “The Operating Agreement will lay out: 1.) Interest ownership of Members. 2.) Rights and responsibilities of Members. 3.) Type of Management. 4.) Allocation of profits. 5.) Manner of holding meetings and voting. 6.) Buyout provisions. 7.) Timeline for profit distributions. 8.) The voting power of Members and Managers. 9.) Limits on disposing of LLC interest. 10.) Member death and disability. 11.) Dispute resolution.”
• “The first decision is whether to go to the State website and learn about the process of creating an LLC and then doing it yourself, or to pay an online service to do it. My feeling is that if you actually intend to become a business professional, and are not just playing around, you need to learn all you can about LLCs, and then do the formation yourself.”
• “The second decision you will make concerns your Operating Agreement. Don’t do it yourself. Learn what an Operating Agreement is, and what it does, and then find an Attorney who practices Real Estate Law, and who has Real Estate Investors as clients.”
• “When you have finished the consultation regarding the Operating Agreement, show the Attorney the documents that you intend to file in order to form the LLC, and go over the documents with him.”
• “The members will contribute: 1.) cash, 2.) property, 3.) personal services, or 4.) a promise to contribute cash, property, or personal services in the future.”
• “In return for these ‘Capital Contributions,’ the LLC Member will receive a percentage of ownership called ‘Capital Interest.'”
• “However, the Operating Agreement of the LLC can handle allocations in a flexible manner, without regard to ownership percentages, referred to an Unequal Allocation.”
• “Under the LLC laws in most States, all Members are equally responsible for the management of the LLC.”
• “Although the State laws do not usually require annual meetings, and your Operating Agreement does not have to contain such a provision, it is a good idea for one of the Members to request a Special Meeting at least annually for the purpose of updating, reviewing, and summarizing operations.”
• “Restrictions should be placed on the transfer of Capital Interest in the Operating Agreement.”
• “The LLC should be created first, and then the real estate should be purchased by the LLC. You should not purchase the real estate first, and then try to put it into the LLC.”
• “If the LLC is new, and it probably will be, and you are not paying cash for the property, it will be difficult, and maybe impossible, to get a mortgage in the name of the LLC. However, there are Lenders who will loan money to the LLC and take the real estate as security on the loan, if the Loan-to-Value (LTV) ratio is low enough.”
• “The second is a Guaranty Agreement, where you guarantee the Lender that you will cover any loss suffered if the loan goes into default, the Lender forecloses, and does not realize enough net proceeds to pay the loan. The second is obviously better.”
• “You should always hold each of your rental properties in a separate LLC.”
• “If you put only one property into each LLC, the losses from one LLC are deductible from the income of the other LLCs, shielding that income from taxation.”
• “Since the LLC is a Pass-Through Entity (PTE), the income will come to the Member or Members as Capital Gains to be reported on their individual tax returns.”
• “Your LLC will operate as a Pass-Through Entity (PTE) and all of the income, deductions, credits and other items will pass through to the Members and be reported on their individual tax returns.”
• “The Distributive Share is the amount of an LLC’s annual profits and losses that will be allocated to each Member. Usually, the Distributive Share is the same as the Member’s Capital Interest.”
• “A Capital Account shows the amount of money put into the company by the investor/owner, plus his allocated portion of the profits, and minus the distributions that he has received.”
• “The Entity will purchase an asset. The purchase price is the Entity’s basis in the asset. The Entity might spend money to improve the asset. This cost is added, creating a new Basis. The Entity might be entitled to deduct a portion of the Basis as a “Depreciation Allowance.” This is deducted, and will create a new Basis. This is the Inside Basis, the Basis that the Entity has in the assets.”
• “If there are two Owners and they each invest $30,000 to become partners in the Entity, each Owner would have a $30,000 Basis in their interest in the Entity. The Outside Basis can be increased if the Entity secures a loan and the loan is personally guaranteed by the Owners. This is different from an S Corp, where the Outside Basis can only be increased if the Owner loans the money to the Entity.”
  “Being classified for tax purposes as a Disregarded Entity means that for purposes of reporting the income and paying the taxes, it is the same as if you owned the property in your individual name. The rental income will be reported on your Schedule E, and the LLC will file nothing with the IRS. If the LLC has more than one owner, it will not be a Disregarded Entity, but will be considered a Partnership. The LLC will than file a Form 1065, US Return of Partnership Income, and then provide a Schedule K-1 (Form 1065) for each Partner, showing each Partner’s share of income, deductions, credits, and other items, which the Partner will report on his personal return.”
• “If you are a Disregarded Entity, an S Corp, or a Partnership, the income that is passed through to you qualifies for the Section 199A 20% Qualified Business Income Exclusion.”
• “You will not be able to form your LLC in a State that has no income tax, and thereby avoid paying State taxes where you reside.”
• “The only thing you lose will be your Equity. And if you are careful and make sure that you carry as much debt as possible on the real estate, this will prevent the LLC from even being sued in the first place, because there is not enough equity to justify the time and expense of a lawsuit.”
• “Go to http://www.statelocalgov.net.”
  C Corp
• “The Incorporator, also called the Organizer, files a document called Articles of Incorporation, or maybe Articles of Organization, with the Secretary of State of the State in which the corporation will be based.”
• “The information required to be in the Articles will vary, but will usually include the name of the corporation, the address, the name of the Organizer or Initial Director, and the number of shares of stock authorized. In addition, the Articles will contain the name and address of a Registered Agent, someone who will be authorized to receive all legal notifications on behalf of the corporation.”
• “The Bylaws are the rules for the internal operation of the corporation, and are not made public, but describe all of the processes for such things as issuing stock, electing the Board of Directors, the titles of the Officers, what their responsibilities will be, and how they will be chosen.”
• “You sell the real estate to the corporation for $X and you receive a Promissory Note from the corporation in return. As long as the price is at or near the market value, and the terms of the transaction are “in the ordinary course of business,” this is a legitimate “arms length” transaction and will meet IRS approval. If you sell the property for more than your Basis, you report the transaction on your personal tax return and you pay the Capital Gains tax. Alternatively, you can treat the transaction as an Installment Sale, and only report the profit portion of the payments as received. The real estate goes onto the company books at the purchase price, and the depreciable portion is depreciated for the appropriate period. The corporation will make payments to you and will be able to deduct the interest portion of the payments as an expense. You receive the payments and report the interest portion as income. If you paid all of your Capital Gains tax up front, the principal portion of the payments are not taxable to you.”
• “Operating rental real estate activities in a C Corp means that the income is business income, and is taxed at the corporate tax rate of 21%.”
• “It is rare for rental real estate to be owned in a C Corp.”

S Corp

• “You become an S Corp by first being a Limited Liability Company (LLC) or a C Corporation.”
• “The “S Corp” is not a type of Entity, it is a ‘tax election.'”
• “If the S Corp started as a C Corp, the business is operated the same way as a C Corp is operated. If the S Corp started as an LLC, the business is operated the same way that an LLC is operated.”
• “The income from your S Corp will not be taxed at the corporate level. Instead, it will pass through to you and be taxed at your personal income tax rate. But, the income will not be considered self-employment income, and therefore will not be subject to the Social Security tax and the Medicare tax.”
• “A salary of $45,000 that the S Corp pays you will be deductible by the corporation as an expense, along with one-half of the 15.3% Self-Employment Tax that the corporation must send to the IRS. The other one-half of the 15.3% will be withheld from your paycheck.”
• “The income is not considered Self-Employment (SE) income, so it is not subject to the 15.3% SE Tax.”
• “This is very important if you do not have other W-2 income of at least $128,700 (2018), which would mean that you have paid the maximum amount of Social Security Tax for which a single Taxpayer is liable. If you have already paid the maximum amount (or had it withheld, actually), then you would only be liable for the Medicare portion of the 15.3% SE Tax, which would be 2.9%.”
• “The S Corp, out of a C Corp or an LLC, is normally not the first choice for operating a rental real estate business. The LLC is the most used format, either choosing to be taxed as a Disregarded Entity for a Single Member or as a Partnership for a Multi Member LLC.”
• “For the LLC that is not a rental real estate company and chooses S Corp status, it allows the owners to avoid a large portion of the SE Tax that would be assessed on their business if they operated it as a Disregarded Entity or Partnership, and received the business income.”

General Partnership

• “A General Partnership is like a Sole Proprietorship, except that it involves more than one person.”
• “The correct way to form a General Partnership is to create a General Partnership Agreement.”
• “The Agreement will state the terms of the business arrangement and how the Partnership will be formed, operated, and dissolved. It will cover such matters as: 1.) Initial Capital Contribution. 2.) Ownership Percentage. 3.) Profit and Loss Allocation. 4.) Division of tasks and responsibilities. 5.) Management. 6.) Dispute resolution. 7.) Dissolution and distribution of assets.”
• “The Assumed Name Certificate which you file in the county records will identify the Partnership, the Partners, and the address of the business. And finally, you will need to obtain an Employer Identification Number (EIN) from the IRS.”
• “The IRS will require a declaration of who will be the Tax Partner, and this is a very important decision for everyone. The Tax Partner is authorized to deal with the IRS on behalf of the Partnership.”
• “The real estate can be purchased in the name of the General Partnership, but if there is no written agreement that outlines the terms of the purchase, management, and eventual sale of the property, it can lead to the real estate being locked into a contested ownership situation and might cause the real estate to become unmarketable.”
• “As an Example, you might create an LLC and contribute your real estate to the Single Member LLC in return for all of the Capital Interest. And then your LLC can lease the real estate to the General Partnership, and the General Partnership will function basically as an operating company with limited ownership of assets.”
• “The bad news is that it will still be passive income, and any losses cannot be deducted from your other ordinary income, only from other passive income.”
• “The cost of Accounting, and the cost of preparing Tax Returns and Schedules for the Partnership and for the Partners are two of the reasons for not choosing the Partnership as your business entity.”
• “The General Partnership has unlimited liability for all of its own activities, and in most cases, the activities of the individual Partners if those activities are associated with the General Partnership.”
• “The reason that the General Partnership does not pay taxes is because it is what is referred to as a “Pass-Through Entity,” or PTE.”
• “However, the General Partnership is a clean and simple way to structure some businesses, if you take the precautions to limit the liability of each of the participants. It is not unusual for a General Partnership to be formed by a couple of LLCs.”

Limited Partnership

• “A Limited Partnership is a partnership made up of a General Partner and one or more Limited Partners. The General Partner is the Manager, and bears all of the liability for the Limited Partnership. The General Partner does not have to be an individual, but can be a C Corp, S Corp, or Limited Liability Company (LLC). The Limited Partners have no liability for the operation of the Limited Partnership beyond the amount of their initial investment. The Limited Partners are prohibited from taking part in the operation or decision-making of the management of the Limited Partnership.”
• “Like the LLC, the S Corp, and the General Partnership, the Limited Partnership is a Pass-Through Entity (PTE).”
• “The Limited Partnership (LP) is created by the filing of a Certificate of Limited Partnership with the State in which the Limited Partnership is domiciled.”
• “Then, another document, called a Limited Partnership Agreement, is signed by the General Partner and the Limited Partners.”
• “The Limited Partnership Agreement can be used to prevent outside ownership, or prevent an unwanted spouse from inheriting the Partnership interest, with use of Right of First Refusal provisions.”
• “Limited Partnership interests are also classified as securities. So, depending on who you are selling to, and how you are doing the selling, you might be required to comply with State and Federal securities laws.”
• “1.) The Limited Partnership can expire under the terms and conditions set forth in the Certificate of Limited Partnership. 2.) The Limited Partnership can expire by unanimous agreement of all members, General Partner and all Limited Partners. 3.) The Limited Partnership can end with a change in any of the basic elements described in the Certificate of Limited Partnership, requiring the filing of a new Certificate of Limited Partnership. 4.) The Limited Partnership can be dissolved by the Court in any matter that has resulted in the filing of a lawsuit and rendering of a verdict requiring dissolution.”
• “The Limited Partnership is essentially a vehicle for raising capital.”
• “The Limited Partnership is the best Business Entity to fit the situation where one individual wants to operate a large investment project, but needs to have money from investors.”

Trust

• “The Grantor is the person who creates the Trust. He is the only one involved at this point, and makes all of the decisions and sets all of the terms. A Trust is usually created with a written document, called a Trust Agreement.”
• “The Trustee administers the Trust. The Trustee is named in the Trust Agreement by the Grantor, and the Trustee’s powers, duties, and responsibilities are detailed in the document. The Trustee is “independent.” His actions cannot be directed or influenced by the Grantor or anyone else. If the Trustee is not independent, the Trust is invalid under law.”
• “The Beneficiary is the person who receives the benefits of the Trust.”
• “The Beneficiary has no say in how the Trust is administered.”
• “The ‘corpus’ of the Trust means the body of the Trust. In other words, the corpus is the asset or assets placed in the Trust. The asset might be an Installment Note with monthly payments being received, or it might be a Duplex with monthly rent payments being received.”

Land Trust

• “We are talking about the Land Trust as a Business Model, a platform for holding income-producing real estate or investment real estate. There is no Federal Land Trust Law. So the activity is governed on a state-by-state basis.”
• “There are ten (10) states that have passed laws providing for the creation of a Land Trust in their individual states: 1. Alabama, 2. Florida, 3. Georgia, 4. Hawaii, 5. Illinois, 6. Indiana, 7. Louisiana, 8. North Dakota, 9. Ohio, and 10. Virginia. These are called Land Trust States.”
• “1. Settlor – the person who creates the Trust. 2. Trustee – the person who is supposed to manage the Trust, but actually does what he is told by the Beneficiary, and holds title to the real estate. He does not have to be “independent,” can be a brother or sister. 3. Beneficiary – the person who receives the benefits of the Trust. It can be anyone, even the Settlor, and can also be a business entity. The Beneficiary runs the Trust, telling the Trustee when to sell or buy, and collects the rents, etc. 4. Corpus – the real property of the Trust.”
• “The Trust document is not filed anywhere publicly. It is just put in a desk drawer, assuming that it ever even existed. The Land Trust is ‘revocable,’ which means that it can be revoked by the Settlor one minute after it is created, or a year later, just by tearing up the original Land Trust Agreement and throwing it in the trash, or by writing ‘revoked’ across it, or by ‘any other act sufficient to evidence the intent to do so.'”
• “There are two basic types of Trusts, an Irrevocable Trust and a Revocable Trust.”
• “The most common type of Revocable Trust is the Living Trust. It is more accurately called a Revocable Living Trust, and I have complete information on it in the following Chapter.”
• “A Land Trust does not offer Asset Protection. A Land Trust does not offer any tax advantages. A Land Trust does not offer anonymity or even privacy.”

Living Trust

• “A Living Trust is not a Trust. It is a document that you write saying that you are putting property aside for the benefit of someone, and that you are designating another person to manage the arrangement.”
• “The arrangement can be undone by you at any time, just by ceasing to do whatever you are doing and telling anyone else involved to cease their activities. Or you can tear up the document. Or you can write “revoked” across it. Actually, you can just sell the property and keep the net proceeds yourself, and ignore the document. That’s why the correct legal term for a Living Trust is Revocable Living Trust. You can revoke it during your lifetime.”
• “The income generated by the property is still your personal income because you have not fully and permanently divested yourself of ownership of the property and the IRS will expect the income to be included on your tax return, and will expect the taxes to be paid by you. For that reason, the Beneficiary to whom you are directing the income cannot include the income on his tax return because he does not own the property, and the income is actually just a gift from you, because you still own the property. You might have a Gift Tax problem, but that is another discussion.”
• “You provide in the Trust Agreement that the Revocable Living Trust becomes Irrevocable upon your death. At that point it becomes a true legal trust that does own the property. That is critical because it means that the property is not part of your estate and does not have to be passed to your heirs by using a Will and going through the process of Probate.”
• “In the Trust Agreement, you provide for a Successor Trustee, and you instruct the Trustee to collect all of your assets that you put into the Trust, pay the debts against them, and distribute them to the Beneficiaries in the manner you describe. You also name the Successor Beneficiaries, the persons who will become the Beneficiaries after you die. They will receive your assets in the manner that you describe in the Trust Agreement. All of this takes place without any Court filings, or any Court supervision, and without any public notice. You are able to pass all of your assets to your heirs without having a Will and without going through probate proceedings.”

Bonus Depreciation

• “The new rule covers purchased business assets such as furniture, fixtures, appliances, equipment, computers, and similar items, with useful lives of less than 20 years. They can usually be depreciated over 5, 7, 10, and 15 years, and the depreciation is available for the first year that the item is placed in service.”
• “The new law has eliminated Bonus Depreciation on a new category of property that it calls ‘qualified improvement property,’ referred to as QIP. QIP is certain improvements to buildings that are not residential rental buildings. This category formerly included ‘leasehold improvements.’ But this new QIP is now eligible to be treated as Section 179 property, and also has a new 15-year depreciable life instead of the 39 years that generally applies to non-residential buildings.”
• “Bonus Depreciation as it stands now will run through 2022 unless the law is extended. Then it will begin to be phased out, dropping to 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and 0% after that.”
  Qualified Business Income
• “‘Qualified Business Income’ (QBI) is the income from a ‘qualified trade or business.’ A ‘qualified trade or business,’ as explained in the prior Chapter, is a Pass-Through Entity (PTE). A Pass-Through Entity (PTE) is ‘an entity that passes its income, losses, deductions, or credits to its owners, who might be partners, shareholders, beneficiaries, or investors.'”
• “And QBI does not include interest, dividends, or capital gains.”
  “The new Tax Cuts And Jobs Act (TCJA) provides for and exemption from taxation for up to 20% of the income of the QBI. If your total taxable income from all sources is $50,000, and your QBI portion of that is $40,000, you can exclude $8,000 from taxation, which is 20% of the $40,000 QBI.”
• “The Threshold Amount is the income amount that you must be under in order to qualify for the flat 20%. The Threshold Amount is $157,500 for individual taxpayers, and it is $315,000 for married taxpayers filing jointly (MFJ).”
• “If your total taxable income is below the Threshold Amount, your QBI exclusion amount is simply 20% of the QBI for each of your qualified businesses. QBI is determined on a ‘per business,’ not a ‘per taxpayer,’ basis.”
• “And if you are below the Threshold Amount, you don’t have to deal with the complications contained in the remainder of the rule. You’re finished. But if your taxable income is above the Threshold Amount, you are still eligible for the Exclusion, but there is a second ‘exclusion’ that you must also calculate. You are only entitled to take the smaller of the two exclusions, the 20% exclusion, or the new exclusion amount. Your new exclusion is called the ‘wage and capital limit.’ The ‘wage and capital limit’ is the greater of either: 1.) 50% of W-2 wages with respect to your trade or business, or 2.) the sum of 25% of these W-2 wages, plus 2.5% of the unadjusted basis, immediately after acquisition, of all qualified property. ‘Qualified property’ is tangible property subject to depreciation and available for use in your business at the end of the tax year, and used in the production of the QBI.”
• “You might no longer want to operate the business entity that you are operating, but want to continue with your business, just using a different type of entity. There are four ways that you can do this. 1.) Conversion. 2.) Merger. 3.) Dissolution and Formation. 4.) Asset Sale.”
• “The use of the last two, with the help of a good Attorney, will often provide the better route for you to accomplish your goal in the manner best for you.”

Real Estate Professional

• “You must perform more than 750 hours of personal services during the tax year (which is usually the calendar year) in real property trades (plural) or businesses (plural) in which you materially participate.”
• “Section 469(c)(7)(C) says that the term “real estate trade or business” includes: ■ Any real property development. ■ Any real property redevelopment. ■ Construction. ■ Reconstruction. ■ Acquisition. ■ Conversion. ■ Rental. ■ Operation. ■ Management. ■ Leasing. ■ Brokerage.”
• See: Www.law.cornell.edu/cfr/text/26/1.469-5T.
• “And if you cannot satisfy the 750-hour requirement, or you cannot prove ‘material participation,’ you cannot qualify as a Real Estate Professional, regardless of everything else. You’re done.”
  “More than 50% of the total personal services that you perform in trades or businesses must be in real property trades of businesses in which you materially participate.”
• “But losses from real estate rental activity are passive losses under the Internal Revenue Code, and can be used to offset passive income, but cannot be used to offset income that you receive from “non-passive” activities.”
• “If your MAGI is above $100,000 the $25,000 amount is reduced by $1 for each $2 of income. MAGI of $110,000 is $10,000 above $100,000 and would reduce your $25,000 allowable by $5,000 and you could only offset $20,000 of other passive income.”
• “At $150,000 MAGI, you are unable to claim any of your passive losses.”
• “However, if you qualify as a Real Estate Professional, your rental real estate activity is not automatically considered a passive activity. And if you materially participate in the activity, then you can deduct any losses against your other non-passive income, such as W-2 wages.”
• “A Real Estate Professional’s income from real estate rentals is also excluded from the definition of self-employment income, and is not subject to the 15.3% additional SE Tax.”

Flipping Properties

• “But, if you are flipping properties you will probably be considered by the IRS to be a real estate ‘dealer.'”
• “Even if some of the properties are held in your name for more than 12 months before they are sold, you still cannot claim Long Term Capital Gains status on the income.”
• “You can review all of the options above, but I will tell you that the best of the options for flipping properties is to operate your business as a Subchapter S Corporation, also called a Sub S, or as we will call it, an S Corp.”
• “You might consider using a new Entity each time that you purchase a new project. When you sell a property, just go dormant with the Entity, and wait for four to six years, depending on when the Statute of Limitations on the most likely claims are in your State, and then use the Entity again.”

Charging Orders

• “A Charging Order (CO) is an Order issued by a Court and signed by a Judge, directed to an individual or legal entity that is holding funds, or controls the distribution of funds, for a second individual.”
• “This comes about when there has been a lawsuit filed against the owner of the funds, and the lawsuit has resulted in a Judgment being granted against the owner of the funds.”
• “The Charging Order requires that when and if the distribution is made, it must be made to the Judgment Creditor instead of your brother, the Judgment Debtor.”
• “But you can have the LLC owned by another LLC that you create in a State with strong Charging Order protections, like Texas, Wyoming, Michigan, or Nevada. This way, you don’t own the LLC that owns the real estate. You own the LLC that owns the LLC that owns the real estate.”
• “Charging Order protection is denied completely to SMLLCs in: 1.) California, 2.) Colorado, 3.) Georgia, 4.) Florida, 5.) Kansas, and 6.) New York. On the other hand, States with statutes that clearly say that the Charging Order is the only remedy available to the holder of the Judgment Lien are: 1.) Nevada, 2.) Wyoming, 3.) Delaware, 4.) South Dakota, and 5.) Alaska.”
• “Right now, there are about five strong LLC environments. 1.) Nevada, 2.) Wyoming, 3.) Delaware, 4.) South Dakota, and 5.) Alaska.”
• “Nevada, South Dakota, Alaska, and Wyoming also have the advantage of no State income tax.”
• “You might just want to use a separate LLC for each of your rental properties, and keep the loans as high as you can, so that there is as little equity as possible. Or you might want to go ahead and operate with a Delaware or Nevada LLC and have it own the other LLC which are holding the real estate.”

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