I'M THE OWNER OF 2 SMLLC WHICH ARE SUBSIDIARIES OF A HOLDING COMPANY (MMLLC) THAT I ALSO OWN. EACH SMLLC PURCHASED A PROPERTY, ONE IN CT AND THE OTHER IL. THE HOLDING COMPANY OWNS BOTH SMLLC. I'M ABOT TO START RENTING BOTH PROPERTIES, BUT IS UNSURE HOW TO SETUP COLLECTION PF THE RENTAL INCOME. IS IT BETTER FOR EACH SMLLC TO COLLECT IT'S OWN RENTAL INCOME, OR SHOULD I JUST COLLECT THE RENT UNDER THE HOLDING COMPANY (MMLLC)?IF EACH SMLLC COLLECTS ITS OWN RENT, HOW WOULD I SHOW IT ON FORM 8825 OF THE 1065?IF THE RENT IS PAID DIRECTLY TO THE HOLDING COMPANY THEN HOW SHOULD I RECORD IT ON THE 1065 SINCE IT'S BYPASSING THE SUBSIDARY (SMLLC).

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Question

RECORDING RENTAL INCOME

Forum|Forum|10 months ago
May 16, 2025
1 reply
0 views

I'M THE OWNER OF 2 SMLLC WHICH ARE SUBSIDIARIES OF A HOLDING COMPANY (MMLLC) THAT I ALSO OWN. EACH SMLLC PURCHASED A PROPERTY, ONE IN CT AND THE OTHER IL. THE HOLDING COMPANY OWNS BOTH SMLLC. I'M ABOT TO START RENTING BOTH PROPERTIES, BUT IS UNSURE HOW TO SETUP COLLECTION PF THE RENTAL INCOME.

IS IT BETTER FOR EACH SMLLC TO COLLECT IT'S OWN RENTAL INCOME, OR SHOULD I JUST COLLECT THE RENT UNDER THE HOLDING COMPANY (MMLLC)?
IF EACH SMLLC COLLECTS ITS OWN RENT, HOW WOULD I SHOW IT ON FORM 8825 OF THE 1065?
IF THE RENT IS PAID DIRECTLY TO THE HOLDING COMPANY THEN HOW SHOULD I RECORD IT ON THE 1065 SINCE IT'S BYPASSING THE SUBSIDARY (SMLLC).

KristinaK

Employee

My suggestion would be for each SMLLC to collect rent and pay its own expenses. The reason is that this way it will not blur the entity separation. Better for asset and liability protection. The fact that the properties are in different states also advocates for this method.

SMLLCs do not file their own tax return. The sole member reports the income and expenses on its own return. That is to say, the MMLLC will file Form 1065. You will report each property on a separate 8825. Then the net of the rental activity will flow to Schedule K-1. And each LLC member will, in turn, report that income/loss on their own tax return.

The MMLLC will probably be required to file a multi-state return to show the activity in each state.

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