My wife and I want to get started investing in real estate,
but I’m not sure the best way to go about it. We live in California,
but would like to purchase property in another state.
As I understand it, if we form an LLC, we have to pay to set up the LLC as well as
pay $800 minimum tax to California every year. I believe you also have to get a business
license and pay for permits to run your business in the city where your business is located.
It seems like a lot of my potential profit will go towards paying taxes to run a small business
instead of in my pocket. This doesn’t seem like a good investment.
The other option is to form a general partnership with my wife instead of an LLC. I would still
have to get licenses and permits to run the business, as well as file a fictitious business name,
but I would skip out on the $800 minimum tax that the LLC would force me to pay. However, I would have to purchase Liability insurance to help protect against lawsuits, etc.
Seems cheaper than an LLC, but still takes a lot of money out of my pocket.
I guess my question is, do we have to set up a business to own rental properties?
Couldn’t we just purchase a property and a limited liability insurance policy and skip out on all the business taxes?