Commercial real estate question - accountants and lawyers

[Chuck Moreland]

I'm looking to purchase a commercial building that will be owner occupied. The business is structured as a single-entity LLC, that may change to S corp but not in the immediate future.

What are the pros/cons of ownership of the building in my own name vs under the company?

I'm thinking tax, liability, and ease-of-liquidity implications. What else?

[greglepore]

No real tax or liquidity implications. Biggest advantage is asset protection should someone obtain a judgment or the mortgage default, unless you and your spouse personally guarantee the mtg.

[turbo6bar]

I am drawing from memory, and not experience, but I believe that property held by a company is not eligible for a 1031 tax exchange, while personally held property is. jurgen

[berettafan]

i think you mean 'single member llc' which, for tax purposes, is reported on your schedule C and not a separate return.

the typical bsns owning a building scenario is as follows:
-bsns operates as an S corp (no SE tax but for salary)
-r/e is owned by LLC for the reasons to follow:
-store being owned by LLC is safe from any lawsuits against operating
company (ie customer slips on floor) as suit would be against
operating co (again, in theory).
-you sell high risk items so suits related to them would, again, be
against your operating co which, in theory, keeps the r/e somewhat
safe. this is important because the operating company is just a job
whereas the r/e is your retirement.
-r/e can be put into and taken out of LLC's without triggering gain
recognition (not so in an S corp for example) so you have flexibility
in what you do.

Corps and LLC's most certainly CAN do like kind exchanges.

If your operating entity is currently an LLC please look at your 1040 and check how much self employment tax you are paying. if you have an LLC that shows a profit of $100k you are paying SE tax on the whole shebang UNLESS your CPA is using guaranteed payments and .......(it get's sorta complicated). By OPERATING (not refering to ownership of the building) as an S corp you can set your own salary (within reason) and, for example, only pay SE tax on $50k of the profit vs. $100k in my example.

There is a lot more to it than what i am typing here but hopefully this gives you some food for thought and sends you to a qualified CPA for assistance.

Erik