Real estate LLC compliance

Real estate LLCs are typically structured by property · one LLC per property · to isolate liability. The compliance burden multiplies accordingly.

1. Single-asset LLCs

Each property gets its own LLC. If a tenant sues over an injury at Property A, only Property A's LLC is at risk; Properties B and C are not. The "veil" protection works best when each LLC has its own bank account, its own books, and its own arms-length transactions with the others.

Practical cost: 10 properties = 10 LLCs = 10 annual reports, 10 registered agents, 10 EINs, 10 partnership returns if multi-member. The compliance line item is real.

2. Series LLC

Available in about 18 states (Delaware, Texas, Illinois, Nevada among them). One "master" LLC with multiple "series" inside. Each series provides liability protection like a separate LLC but you have one annual filing instead of many.

The tax treatment of series LLCs at the federal level is unsettled. The IRS treats most series as separate entities for tax purposes, meaning you may still file multiple returns. Where series shines is state filing simplification, not federal tax.

3. 1031 exchange structures

A 1031 like-kind exchange defers capital gains on investment property when you trade up. Most exchanges are done through a Qualified Intermediary; some use Delaware Statutory Trusts as the replacement property holding structure.

The LLC formation work for 1031 exchanges is mostly creating an SPV (single-purpose vehicle) to hold the replacement property. Standard LLC formation, but timing matters: must identify replacement within 45 days, close within 180.

4. Foreign-owned real estate (FIRPTA)

If a non-US person owns a US LLC that holds US real estate, FIRPTA (Foreign Investment in Real Property Tax Act) applies on sale. The buyer must withhold 15% of the gross sales price and send to the IRS. The foreign owner files Form 1040-NR or similar to compute actual tax and claim refund of excess withholding.

Foreign-owned LLCs also have the Form 5472 obligation. See our 5472 guide.

5. State-specific quirks

California: $800/yr LLC franchise tax per LLC. With 10 properties = 10 LLCs = $8,000/yr just in California franchise tax. Series LLC not recognized.
Texas: No franchise tax for LLCs under $1.23M revenue. Series LLC available.
Florida: Annual report $138.75 per LLC, popular state for real estate holdings, no state income tax.
Wyoming: $60-ish/yr LLC fee, popular for asset protection wrappers above the operating LLCs.

Need help with this?

Our team handles formation, EIN, banking, and compliance across the situations described above. Our accountant directory has specialists for the tax side.