# Renting out personal property to business?



## JMHConstruction (Aug 22, 2011)

This is more of a question for my accountant, but though I'd ask some of you guys first and get your opinions and maybe experiences.

We are planning on moving within the next year, and looking to get out of the suburbs and get some land. Is it legal, smart, do-able, whatever you want to call it, to rent (legally, with a contract) an out building that I would own personally to my business (an LLC)? Depending on size, it would be storage, a shop, and a small office. I'd try and set it up as if I were renting a shop commercially.

To me it seems like an easy way on paper for the tax man to deduct a business expense, and also show additional income for my wife and I. Am I delusional, or is this something I should look into more?


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## FredG (Oct 15, 2012)

JMHConstruction said:


> This is more of a question for my accountant, but though I'd ask some of you guys first and get your opinions and maybe experiences.
> 
> We are planning on moving within the next year, and looking to get out of the suburbs and get some land. Is it legal, smart, do-able, whatever you want to call it, to rent (legally, with a contract) an out building that I would own personally to my business (an LLC)? Depending on size, it would be storage, a shop, and a small office. I'd try and set it up as if I were renting a shop commercially.
> 
> To me it seems like an easy way on paper for the tax man to deduct a business expense, and also show additional income for my wife and I. Am I delusional, or is this something I should look into more?


I remember Phil saying he does that, Hopefully he will respond.


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## John_DeereGreen (Jan 2, 2011)

My landscape llc pays rent to my real estate llc. 

Long story short, it's a tax loophole and helps to shelter the real estate from lawsuits on the landscape llc.


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## Randall Ave (Oct 29, 2014)

Yes, it's legal.


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## Maclawnco (Nov 21, 2002)

John_DeereGreen said:


> My landscape llc pays rent to my real estate llc.
> 
> Long story short, it's a tax loophole and helps to shelter the real estate from lawsuits on the landscape llc.


This


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## JMHConstruction (Aug 22, 2011)

So would I have to buy the house through a real estate company, if I went that route?


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## John_DeereGreen (Jan 2, 2011)

I don't see why you couldn't rent a portion of it to your llc if you owned it personally. However, I'm not a tax lawyer, accountant, or IRS guy.

Mac and I both have dedicated real estate for the business, and our residence is a totally separate parcel.


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## 98Chevy2500 (Nov 27, 2005)

Been doing it for years, a separate real estate LLC owns our shop, then the construction business pays rent every month. For tax reasons as well as liability, as JD mentioned.

You can legally pay rent even if it is just a home office with a desk and phone.


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## Mr.Markus (Jan 7, 2010)

Why stop there? Buy your equip personally and lease it to your company...
It seems like a loophole but it becomes personal income, depends on what tax bracket you are in, and what plans you have for the business.


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## Maclawnco (Nov 21, 2002)

Mr.Markus said:


> Why stop there? Buy your equip personally and lease it to your company...
> It seems like a loophole but it becomes personal income, depends on what tax bracket you are in, and what plans you have for the business.


Equipment rental is subject to sales tax each month so you have to weight the value of liability sheilding against that extra 7% burden.

You can walk the line as much as you'd like to try. You might just have a real estate holding company buy the farm and just forget the part about living there. Its all about how many boundaries you want to push.


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## John_DeereGreen (Jan 2, 2011)

Maclawnco said:


> Equipment rental is subject to sales tax each month so you have to weight the value of liability sheilding against that extra 7% burden.
> 
> You can walk the line as much as you'd like to try. You might just have a real estate holding company buy the farm and just forget the part about living there. Its all about how many boundaries you want to push.


So let the holding company buy it, the construction llc pays rent, and he pays (minimal) rent also. Not sure how the fine folks at the IRS would like it in an audit, but one would think that if he is also renting from the holding company, that everything would be on the up and up.

Id be asking a tax lawyer and/or an accountant before doing so, of course.


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## Masssnowfighter (Sep 22, 2012)

I do the same thing, I bought a commercial property through my real estate holding company and I have my Construction Corp pay rent. Both my accountant and lawyer advised me to do it that way


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## Masssnowfighter (Sep 22, 2012)

My lawyer also suggested that the Construction business pay as high of a rent as it could possibly afford


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## Masssnowfighter (Sep 22, 2012)

I actually even have a legit lease between myself and myself, that way my butt is covered in case I ever decide to screw myself over


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## kimber750 (Sep 19, 2011)

I do it on my personal property but it is a separate address to keep the tax man happy. Now adding a separate address is simple, talk to post office and put up a mailbox. Say your main address is 420 High St, the leased address will be 420A High St. I actually have 3 addresses on one property. One thing you may have to check with is zoning.


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## JMHConstruction (Aug 22, 2011)

Thanks guys! I would obviously talk to the guys who get paid to know this stuff first before doing anything, just wanted to see if anyone has done it. Apparently it's more common than I thought. It will be months down the road, but good to know. Thanks again. Also Kimber, adding a second address is a great idea, and I'll look into that as well.


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## Philbilly2 (Aug 25, 2007)

I do it. Not with my house, that is totally separate from my property LLC.

My corp is "Key Construction", property is owned by "YEK LLC" 

I have two separate Quickbooks files. I physically print a check for the rent from KEY to YEK, put it in the books, print a check from YEK to the bank for the building note, every month. Also have 2 separate insurance policy.

MOL, I think Jarrett hit it on the head. Buy in LLC, rent back to corp for the building, and rent to yourself for the house. 

I believe that would be the best way to work the liability end. I don't know how that will effect you on the tax end... but your accountant will tell you the right way to do it.


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## John_DeereGreen (Jan 2, 2011)

I also do it like Phil. Grand View Landscape pays GVRES rent, GVRES pays the bank. Lawyer wrote up a full legitimate lease, down to I am personally responsible for the rent payments, no matter what llc or whatever the landscape company's name is.

I also own some equipment in another llc and lease it to the landscape company for $1 per year. Not talking hand tools, etc, just high dollar things. Mulch blower, machines, trucks. Collect the sales tax, pay the state. The llc that owns the equipment is listed as an additional insured on the landscape company's policies, and the leases require the landscape company to insure the equipment. Each item has a separate lease, listing vin/serial numbers, etc. 


Masssnowfighter said:


> My lawyer also suggested that the Construction business pay as high of a rent as it could possibly afford


It saves 6.5% or whatever self employment tax, so I would concur. Before rent, the landscape llc does about 25% After rent, it's about 5%.


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## Mark Oomkes (Dec 10, 2000)

My shop is a couple hundred feet from my shop. I personally own the shop, bizness pays me rent.


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## John_DeereGreen (Jan 2, 2011)

Mark Oomkes said:


> My shop is a couple hundred feet from my shop. I personally own the shop, bizness pays me rent.


You have 2 shops?


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## Mr.Markus (Jan 7, 2010)

He lives in one...


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## JMHConstruction (Aug 22, 2011)

Well we put in an offer on something, but someone gave a better one and I wouldn't beat it, so still on the look out. Haven't found "the one" yet, so I'm not too upset on not getting the house. Unless something comes up that is another good deal, I'll probably wait until end of winter to really start looking when I have more time.


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## 1olddogtwo (Aug 6, 2007)

Mark Oomkes said:


> My shop is a couple hundred feet from my shop. I personally own the shop, bizness pays me rent.


Silly me, here I thought it was the skid steer was park a couple hundred feet away from the pond and they both own you.......


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## BUFF (Dec 24, 2009)

John_DeereGreen said:


> You have 2 shops?


More like tew mailing addresses, 6 PS and LS accounts, 6 Cell phones, 36 email addresses, 12 ID's and 6 personality's.......


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## BUFF (Dec 24, 2009)

1olddogtwo said:


> Silly me, here I thought it was the skid steer was park a couple hundred feet away from the pond and they both own you.......


The only thing that owns him is the warden......witsh make him nothing more than a....


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## LadderCo2 (Dec 23, 2014)

Wow! Talk about confusing...does your real estate company then pay your landscaping and plow company for services too? I am just trying to figure out a small piece of the business world...this is really taking it to the next dimension.


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## m_ice (Aug 12, 2012)

LadderCo2 said:


> Wow! Talk about confusing...does your real estate company then pay your landscaping and plow company for services too? I am just trying to figure out a small piece of the business world...this is really taking it to the next dimension.


Pretty common practice...get a good tax person and legal person, without both of them its hard to be successful unless your an expert. I'm not so I have both.


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## Philbilly2 (Aug 25, 2007)

LadderCo2 said:


> Wow! Talk about confusing...does your real estate company then pay your landscaping and plow company for services too? I am just trying to figure out a small piece of the business world...this is really taking it to the next dimension.


Small things like that are "worked out" in the lease agreement. You will put in the the lease that the snow plowing is to be taken care of by tenant (which is still you in the end). This will remove your holding company from the liability of handling the grounds.


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## BossPlow2010 (Sep 29, 2010)

So you set up your real estate LLC as a completely different business with a different TIN, as opposed having an additional DBA with the same TIN?


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## Philbilly2 (Aug 25, 2007)

BossPlow2010 said:


> So you set up your real estate LLC as a completely different business with a different TIN, as opposed having an additional DBA with the same TIN?


Yes, they are two totally different companies... they have different member meeting minutes books, different Tax ID #'s, you will file two separate corprate taxes for the two separate business entities...


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## BossPlow2010 (Sep 29, 2010)

Awesome thanks!


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