SMLLCs: The good, the bad and the ugly

Description

Abstract: Real estate investors are increasingly forming single-member limited liability companies (SMLLCs) to hold properties — or interests in partnerships that hold properties — and protect themselves from certain liabilities. Part of the attraction lies in the fact that SMLLCs can be classified by the IRS as “disregarded entities,” meaning they’re ignored for income tax purposes. But investors should bear in mind that these entities can produce undesirable tax consequences if they hold partnership interests. This article examines the federal tax implications, while a sidebar looks at other taxes that may be involved.