I have an LLC-sole manager- with rental properties in the US. I am considering downsizing and living in one of the rental properties. Should I pay rent to my LLC? What are the legal/tax implications and considerations.

  • Do you operate the business as a sole proprietorship as far as the IRS is concerned, or some other legal entity? LLCs can be setup many ways. – BrianH Jan 20 '16 at 19:49

That may become complicated depending on the State laws. In some States (California for example), LLCs are taxed on gross receipts, so you'll be paying taxes on paying money to yourself. In other States this would be a no-op since the LLC is disregarded. So you need to check your State law.

I assume the LLC is not taxed as a corporation since that would be really stupid of course, but if it is then it adds the complexity of the Federal taxes on top as well (corporate entity will pay taxes on your rent, and you'll pay taxes on your dividends to get the money back).

The best option would be to take that property out of the LLC (since there's no point in it anyway, if you're the tenant).

  • 2
    What if the property have multiple units and he live in one but rent the other out? – Rémi Jan 21 '16 at 14:20

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