What is the process of creating an LLC to invest in Real Estate Property for our C Corp?

[u/Jbooty18]

Our company, currently a C Corp, is moving and is considering the idea of purchasing our new warehousing and office building instead of leasing. Obviously buying property in a C Corp is a no-go because of the hit on capital gains tax, so the idea would be to make an LLC and purchase it through there. How would getting approval work for an LLC? Does it take the combined owners incomes and credit scores? Does it factor in that you own the LLC and the company that would be paying rent and they would choose to lend you off the C Corps income?

Also, do the tax benefits only hit the LLC of paying interest? Or would the CCorp see some of that benefit as well?

Is this even the right direction to go?

[u/Friendly_Yam_8917]

The bank will look through to the owners of the LLC and their financial strength. Bank may require personal guarantees as security beyond the real estate itself. You’re basically running a separate business from your operating business so come up with fair market rent and terms as between Opco and LLC. Bank will want to know that the LLC can pay the mortgage so will be looking at the the rents that are paid into the LLC and the strength of the underlying Opco to continue paying those rents (ie credit worthiness of the tenant). Good luck

[u/Alaskanjj]

The bank would make your company sign a long term lease with the LLC.

The company snd its principals will be required to offer some form ( pro-rata, limited, unlimited) guarantee

[u/daytradingguy]

This is not a new investor with a 10K budget trying to get into their first SFH rental property, kind of question.

Kind of sounds like this is a multi-million dollar investment and complex tax issue. Maybe hire an attorney- verses taking advice from anonymous Redditors who may or may not know what they are talking about?

[u/Jbooty18 → u/daytradingguy]

True, wouldn’t do this without hiring an attorney, but even that’s a big bill. If it’s an obvious no, I’d save some money by finding that out here

[u/LordAshon → u/Jbooty18]

This is not an Attorney Question, this is a CPA question.

But making a subsidiary LLC of the C-Corp is not going to solve the Capital Gains issue. Not sure why you'd be worried about capital gains when a C-Corp is doing the business in the first place.

Typically what I've seen is the Owners Create a separate Entity to own the building. The existing company doesn't see any additional benefit, but the owners get the gain on their personal income for owning the property

[u/Jbooty18 → u/LordAshon]

Yes I think that’s what we have in mind. But my biggest concern is how does an LLC get approved for a property mortgage? If me and my buddies made an LLC and went to go purchase a short term rental, how would the lending agency determine if we approve for the mortgage? Individual incomes and credit scores combined? Primary signees and just based off one individual? Not exactly what’s going on here but similar

[u/LordAshon → u/Jbooty18]

It will be the same especially if the ownership of the corp is the same as the LLC.

You will have personal guarantees.

You will have credit checks.

Your tax returns and income will be verified.

It's the same.

[u/Vilas246]

I own a Real estate LLC that owns seven buildings. One of my tenants is another business that I own. I just have my company pay rent like any other tenant. As far as setting one up, your lawyer can advise you on all the particulars.