Can’t use single-member LLC. S corporation is best, if you have no other investor. Spouses can be partners.
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What's the best structure to set up a single investor single asset QOF to purchase a residential investment property?
Can you use a single-member LLC for the QOF? If a corp, is C or S better?
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A QOF must either be a partnership or a corporation. As you are a single member, a partnership won't work. Therefore you are restricted to a corporation (C or S). However, you could have a spouse also be a member to create the partnership. In most cases, Partnerships are much easier to utilize than corps for tax purposes.
You can't use a single-member LLC. It must have multiple members. I have been advising clients to add a token member (a spouse, a child, a non-grantor trust, a single-shareholder s corp, etc.) I would only do a c corp if the QOF is also a qualified small business or is otherwise a startup with acquisition as an exit strategy. I don't believe I'd do an s corp except in a select few circumstances.
Single-member LLCs do not work for a QOF. You need two parties or a C corp for the QOF.
A QOF must be a partnership or corporation, so a single-member, disregarded LLC won’t work. For real estate investments, there are several benefits to a partnership over a single-member S corp, so I’d encourage you to consider whether there is someone else you could bring on as even a de minimis partner. If you choose to go solo, an S corp will serve better than a C corp in most real estate investments.
LLC is best. C and s corps often have other problems and inferior ability in partial future sales. If there will only ever be one owner it may not make a difference, but why reduce your options when set up for single member LLC is the same effort as setting up other entities? Because of charging rules an LLC can offer superior liability protection as well.
A QOF has to be a partnership or a corporation. For real estate the best structure is probably to use a limited liability company but you need to be sure it has two members who are distinct so that it is treated as a tax partnership. A single-member LLC doesn't work, as it is disregarded for tax purposes.
A single-member LLC cannot be a QOF. It has to be a partnership or corp. I prefer introducing an accommodation party to the QOF (even a 0.01% interest and adding the second tier under the fund). If the QOF only holds minimal cash and is drawing on a construction loan, you may be OK, but I don't generally advise using a single-tier structure (though that wasn't your question).
It rarely makes sense to own property in corporate form, even if the entity is taking advantage of the OZ rules, and even if the corporation makes an S election. And, single-member LLCs are simply not eligible to be Qualified Opportunity Funds, which must be taxed as partnerships or corporations. So the best idea is to have a fund is probably to have a fund set up as an LLC with two members, and give just 1% to one of the members. Whether to do this as a "single-tier" fund that directly owns the property depends on whether the property is already built, whether it needs rehab work (is it used?), and your appetite for complexity. While many real estate investments are structured with a fund that invests in a second partnership/LLC that actually owns the property that may not be necessary here if the property is new or the rehab is about to be finished.
No single-member LLC. Has to be taxed as partnership. Husband and wife can elect to be treated separately. Most deals should be an LLC, never C corp.
The answers to this question will depend on who the investors are, their goals, the type if development, etc. It is recommended to obtain legal and tax advisors to collaborate in the definition of the best structure.
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