Husband and wife LLC, partnership
 

First, I sincerely hope everyone is doing well with all the cold weather across the nation. I hope that you reading this means that you are all warm and snug along with your families.

My DW and I started our own LLC partnership last year underwhich to manage our rental real estate. For 2010 our income was minimal, and our startup costs were high, which was fully expected. We did get one property rented in the fall, and the renters are paying on time, every month. (whewww)

I am not an accountant or cpa by any means, but I don't believe the taxes should be all that complicated. At this juncture, I'm trying to decide whether to take a shot at doing them myself, or hire a cpa for at least the first year.

What I understand is that along with my personal fed taxes, I will have to file a form 8232 along with a schedule C.

I am still working full time at this point, but as soon as I get all of the properties rented, I'll have adequate passive income to retire.

I am soliciting input from other LLC husband/wife partnerships out there. How difficult are your fed taxes, and am I on the right track?

Thanks in advance

b

I farm for a living, I have no direct LLC experience, but I'm familiar with self-employed type of income tax.

I guess you should end up with a lot of expenses, from lawn & paving maitenence, plumbing stuff, painting, and roofing over the long term.

If you view this as 'passive' i assume you hire this all out.

I'd think depreciating and planning for all that would best be set up with a goodd CPA familiar with the complicated setups. As well, there can be better or worse ways to transfer wealth between the partners, and perhaps to heirs. Again, following the rules and gaining the most benifit is probably something a good CPA could really help you with.

I run a very small corn & soybean farm, yet I find the $500 a year my CPA charges to be a very good investment, returning me much more.

Again, my comments don't relate directly to LLP, so are likely worth exactly what you paid for them, take or leave at your pleasure. :)

--->Paul

I don't know all the forms, I have a CPA do my taxes for my rental properties which are are owned by my LLC. The LLC is a partnership so partnership forms are filed for that and then I get a schedule K for my personal taxes which is where I pay more in or get my refund. The cost of a CPA is well worth it.

Just my own opinion, hire a CPA, we are a husband/wife LLC and I would never file our taxes without our wonderful CPA. He takes all my numbers and runs them again to make sure all my expenses and bookwork "works" out and does the depreciation on vehicles or large equipment. Plus your CPA will help with planning 2011, probably best return on investment you'll ever do all year. Personally it is probably the best $400 I spend all year.

I am a one man paint company and wouldn't consider not hiring a cpa. She saves me way more then she costs, not to mention I sleep well knowing I didn't make a mistake that will bring the government to my door. about $300 a year.

Jim

In all the endeavors I've done I would never consider doing my own taxes......
Hire a CPA because he/she has the answers as to what can be filed and how. Besides if'n there is ever a question from the IRS he/she gets to jump through the hoops with the "correct" answers.

Hire someone! Worth the money they can save you. And the headaches!

Agree with all other posters. Been at it 20+ years, and my CPA stays on top of all deductions available. Make sure (which I know you will) to pay all taxes when due, I know a lot of people that are habitually late on paying. Guess what- They are the ones that seem to get audited all the time. Now that's one hassle that I hope I (and You) never have to go through.:smack

I'm 56, female, former high school teacher, and I have eight residential rental properties. You need a CPA. No way that you can keep up with all the laws and changes.

You also need a BIG liability policy.

Also, model your lease agreement after the Texas realtor's lease form. http://www.texasrealtors.com/mr/form...01%20Final.pdf

Edited to add: You won't be retiring. You will be changing careers. :)

Do your own taxes this first year. THEN have them checked by a CPA, before filing. This will let you know how far off or on the mark your figures are; and if you are aware of all the available deductions.

That's what I would do.
Contrary to popular opinion, taxes really aren't rocket science. They're pretty straight forward and everything is explained in the booklets that accompany the assorted forms.
But I only do Schedule Cs, a 1040 and sales tax as a sole prop. I'm sure it's more complicated for a LLC.

So far as LLC, with a sole prop or married couple, a LLC isn't really worth the hassle IMO. You can still lose your shirt. You're the only ones responsible, afterall. You've just added an extra layer before they "get you."
But then my attorney told me that, not a CPA. :shrug:

Find a CPA. An LLC is not always the best way to go. My wife and I opened a restaurant and before doing so talked to our accountant about this. His recommendation was just to do it as a sole proprietor. He said it's all based on how much money you anticipate making and what you own. He also emphasized that anLLC doesn't protect your personal property from a lawsuit. Your state may be different though. Be prepared for paying quite a bit of tax. In WA state for our restaurant we paid 40% of the gross.

Bob

Why are you paying taxes on GROSS?

I agree with most of the others. Get an accountant to do it. We had an LLC and the taxes were a pain in the patootie. I did them for two years after our accountant did them for two years (I filed the same forms that he did) and was a nervous wreck. I've done our taxes for many years, but those LLC tax forms drove me crazy. We have since gotten rid of the LLC and just have two sole proprietorships for two seperate businesses that we have. Life is good again.

I would get a CPA for at least the first few years. A good CPA will also help with advanced planning for when it would be best to expand/contract the LLC for tax purposes.

As someone else brought it up, I'll repeat that the LLC was perhaps not necessary. My attorney and accountant said not to bother with it.

[QUOTE=Bentley;4910377]First, I sincerely hope everyone is doing well with all the cold weather across the nation. I hope that you reading this means that you are all warm and snug along with your families.

My DW and I started our own LLC partnership last year underwhich to manage our rental real estate. For 2010 our income was minimal, and our startup costs were high, which was fully expected. We did get one property rented in the fall, and the renters are paying on time, every month. (whewww)

I am not an accountant or cpa by any means, but I don't believe the taxes should be all that complicated. At this juncture, I'm trying to decide whether to take a shot at doing them myself, or hire a cpa for at least the first year.

What I understand is that along with my personal fed taxes, I will have to file a form 8232 along with a schedule C.

I am still working full time at this point, but as soon as I get all of the properties rented, I'll have adequate passive income to retire.

I am soliciting input from other LLC husband/wife partnerships out there. How difficult are your fed taxes, and am I on the right track?

Thanks in advance

..................Is this a Sub. Chapter S corp. ? So , your goal is too split the net income twixt you and the wife and each pays their prorata share of SS and income tax ? , fordy

if you put the llc in the name of only one of you, you don't have to file all the paperwork you have to if it is owned by more than one person. It is much simpler and not hard to do- just fill out a schedule E.

Good question Fordy, but no. DW and I file as "married, filing jointly."

The LLC is not a subchapter s, but is a simply LLC partnership, because there is more than one owner. The fact that the two partners are married has significance that I don't quite understand.

So far, there is a tremendous bias toward using a cpa. I find this very interesting on a forum where folks profess to be independent. I do not mean this as a deragotory statement in any way, but only that I find it interesting.

I have always tried to do absolutely as much for myself as possible. Whether that meant splitting wood, doing taxes, changing my own oil, doing brakejobs, or building fences, and including building my own shop buildings. I have always done my own taxes also, but with the LLC this year, I was less sure of myself.

My thoughts at this point, are to hire a cpa for this year, and use that as a guideline for future years.

Great input from everyone....Thanks

b

..............The most cost effective way too save on bookkeeping expense is for both of you'll too keep the daily bookkeeping at home on a computer accounting system , then you can simply printout the check register , and any other documents your accountant may require and submit them monthly or quarterly as he\she feels is necessary . Besides , when you keep your own set of books at home it forces you too interact on a daily basis with the business decisions you have made , versus taking all the bank statements and check register too a CPA monthly and then having too wait on him too compile the information and receive...."Bad News" , after the fact ! , fordy

.................you should checkout a sub s , it has several advantages over a regular Pship ! , fordy

You use an accountant because he is a trained professional who has to keep up with the changes in tax law and the experience to make decisions that will affect your long term financial health. If you are a homesteader, employed, and have rental properties, you don't have time or the training to act as a professional accountant, too.

You wouldn't do your own surgery or dentistry, so don't do your own taxes.

Keep the books in Quicken or QuickBooks (what my CPA recommends) and take him/her a disc with the file on it at the end of the year. That way, the CPA has all the info for doing the taxes. That way - it's organized, the cost of the tax preparation is less, and you have good records. This is WAY beyond just keeping the check register. QuickBooks turns your information into an an incredible, usable form for the accountant. HOWEVER, I will tell you that it has to be set up correctly, with every 'account' (category of income and expense) allocated properly.

You will find that even the language of accounting is new territory. There are words for things that your accountant will tell you are important, and I don't even *try* to remember. Example: Capitalized Cost - Expenditure identified with goods or services acquired and measured by the amount of cash paid or the market value of other property, CAPITAL STOCK, or services surrendered. Expenditures that are written off during two or more accounting periods.

http://www.nysscpa.org/glossary

There are ways to massage the numbers that you won't know, that are perfectly legal, and unless you have the experience to decide which is best, the one that appears to be *logical* is often the wrong (expensive) way to do it.

As a contractor I deal with a lot of subs that are LLCs. They all have the same reason for incorporating, "to protect myself from......" Like another poster stated, my accountant ( a professor and MBA) and my lawyer both disagree. They both claim that the IRS and any good lawyer wanting a piece of you will get past a closely held, family owned corporation like it never happened. In your case I would recommend asking the question to both professionals. If you are married, have to sign personal (as opposed to corporate) guarantees on all debt, and are not significantly shielded from liability, why complicate anything further by adding corporate tax filing issues to the mix?

One more piece of advice, find a CPA that specializes in *your* industry, so you know that he or she knows all of the usual deductions and credits for your particular industry.

An LLC is not really a separate tax entity like a corporation, depending on how you have set it up or how many partners, but it is just passed onto the partners or sole proprietor on their own taxes.

One last comment on the LLC, in that, yes, of course, *nothing* truly you protects you for anything. It can be *one* piece of a puzzle, that can *help*. Depending on what you are doing, you also are probably going to need a really well crafted contract as well. Even a really good contract might not help you, you can still always be sued or liable. And something you thought was iron clad can turn out to be not so much help, or certainly as not help much as you thought it would be. Creating an LLC creates a separate entity from *you*, which is usually a darn pretty good thing. Just my own opinion of course.

We had that same discussion with our attorney who specializes in family trusts and LLc's. \Now have an LLC for our Ranch. If you are very clear between your personal books and affairs and that of the LLC, that is THE HUGE key. So many are lazy in this regard and "intermingle" their affairs with those of the LLC and that is the common ammo that is used to try and get back an LLC. If you are disciplined and treat them as separate legal entities, the ability to get past an LLC to you personally is greatly reduced. Also, if you have others involved in the LLC (even if they are grown children), and not just husband and wife, that is also a factor that further helps. FInally, we don't own shares in the LLC....we have a personal trust that does.

I'm not a lawyer. I didn't do a "do it yourself" setup, but had an attorney that is well experienced and regarded in family trusts and LLC's. He was clear with us on what we needed to do on a routine basis to maintain the clear separation between us and the LLC. He said nothing is 100%, but he has made it so difficult, that someone would have to spend a lot of money and have a pretty strong claim that the LLC was done just to protect us personally.

You're right Gymno. In the case of multi-generations, siblings, or friends/associates, an LLC is a definite advantage. That's actually its purpose.

But for a sole proprietor or married couple, it doesn't make much sense. :shrug:

And if you ask any lawyer, they'd tell you a LLC is pretty much pointless for a married couple or a sole prop.
You are still the ONLY ones responsible for that "corporation."

This is the professional advice that I have paid for and received from several different sources. I literally do business with a dozen sole proprietors who are incorporated, with the delusion that it gives then some magical shield that will leave the IRS or a plaintiff's attorney without a chance of accessing their personal wealth if it all goes wrong. We recently watched a real good friend lose a trucking and logistics company. The fact that she and her hubby were incorporated and ran the incorporated business cleanly and separately was of no interest to the IRS, state dept. of revenue, or their bank. In the end they lost everything including their home. She spent years complaining that they were attacking her personally, and not the "corporation". I am amazed at how deeply this is ingrained into the small business community in this country, and how so many think it is some kind of "Kriptonite" that will save their bacon.

Legal/financial/tax issues are changing almost daily. As individuals, it is nearly impossible for us to keep up with them, and their many nuances. A CPA specializing in your business (realty in your case) can give you many pointers on ways to save $$$.
In the long run, a GOOD CPA will save you money, not cost you money. Your specialty may be raising cattle (and he cannot be expected to help you at calving time), but his specialty is taxes, and he certainly can help you there.

I personally know a CPA who is an extremely obnoxious person, but fantastic at what he does. He recently took over a new account, and the new client was so impressed with the results, that they agreed to let "John" look over his prior 3 years business. The net results were over $200k refund on "overpaid" taxes for the prior 3 years.
Don't overlook the potential savings of having a "pro" on your side.