Frequently, we recommend to our clients that they set up a limited liability holding company structure for their real estate. The holding company owns 100% of other LLC's that own title to the actual real estate. The holding company is the only company that has to file a tax return (and then, only if there are two or more members of the holding company). So, Corey, one of our School of Tax Strategy members, asks the following question about how to handle the accounting for these LLC's.
Q: Tom, I have an Asset Management Limited Partnership that owns an LLC (the LLC will hold real estate). Because the LLC has a sole owner(AMLP) it is my understanding that it is a disregarded entity and is covered under the AMLP tax return. My question is how do I set this up in Quickbooks so the LLC information flows through to the AMLP while still having the LLC information available separately. Thanks, Corey
A: In this case, Corey is using a limited partnership instead of an LLC for the holding company. Nothing wrong with that. The same principles will apply.
Corey is correct that the LLC is a disregarded entity for tax purposes and only the limited partnership will have to file a tax return.
The way to set up Quickbooks in this situation (i.e., the real estate holding company situation) is to set up the LLC as a class in Quickbooks. Each property owned by the LLC can be a class or you can set up a class for the LLC and sub-classes for each property owned by the LLC. When you want a report about the activity for either the LLC or the property, you simply generate a report by class. This way you can separate the income by property and you can also (if you use subclasses) separate the income by LLC.
Let me know if any of you have other questions about Quickbooks or accounting for your real estate.
Warmest regards,
Tom
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