united-states, taxes, llcI’m considering getting a rental property with a friend, this rental property would mean some liability is involved and thus wanted to register an LLC with a co-owner being this business partner of mine.
I’ve heard rumors of there being hidden tax burdens on small companies that are profitable. Are there any hidden “small business” taxes that would apply to such a small LLC?
I’m assuming the rental property will be rented and thus generating income from the rent price, although the income would not be significantly greater than the expenses.
EDIT
Location: Maryland, USA
In the US, LLC is a disregarded entity for tax purposes (unless you explicitly chose to tax it as a corporation, which is not advised for LLCs holding rental property).
As such, your 2-member LLC will be taxed as partnership: the LLC will file form 1065 and provide K-1 forms to each of you where all the LLC income will be reported. LLC will pay no (Federal) tax. Each of you then add the data from K-1 to your own Schedule E and report your portion of the LLC income on your personal tax return and pay taxes on that portion.
So the only additional step/cost is preparing that form 1065 (something in the range of $100-$300 for a small LLC with small amount of rentals and no other activity, shop around. You can do it yourself with the retail tax preparation software, as well).
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