I own several rental properties with a friend. A tax advisor recommended using the following strategy:

One company for me, call it "Person A LLC" and one for my partner, "Person B LLC".

Then one holding company for each rental property.

I'm sold on having one holding company for each rental property to minimize risk. Not totally sure what owning all of the rental companies through "Person A LLC" gets me?

Accountant said using this structure we would each have more flexibility on how we are taxed, I guess as an scorp vs pass through. Does this make sense? Are there other advantages / disadvantages?

1 Answer 1


A company that owns a rental real-estate is an operating company not a holding company. A company that owns several operating companies is a holding company. The holding company could be a C-corp and get the 21% tax rate but dividends from the C-corp would face double taxation. So most likely only salary would be taken from the C-corp. But the S-corps, as pass-thru operating companies, would pass net-income, without taxation, to the C-corp.

I don't know why the partner in the suggested structure is not a corporate partner.

However, most professionals use only pass-thru S-corps so as to receive maximum income instead of having growth in value of a C-corp. Well, choose income or growth.

Now here's a link that provides a flow-chart for the structure:


And the flow-chart doesn't describe the subsidiary companies as holding companies but describes the parent company as the holding company. Then in my view, the parent company LLC could elect to be taxed as either a pass-thru S-corp or as a C-corp but the subsidiary LLC's must be taxed as pass-thru S-corps.

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