Chapter 1 Introduction

By Jason Watson, CPA
Posted Sunday, May 25, 2025

Chapter 1 serves as a comprehensive introduction to how rental property ownership intersects with business strategy and tax planning. It begins by framing real estate investments not just as passive assets, but as active business ventures that should be managed with intent and structure. The chapter emphasizes the importance of choosing the correct business entity including single-member or multi-member LLC, partnership, C corporation, or S corporations. The decision is based on goals, risk tolerance, debt service, and tax situation including estate planning.

Each entity type is explained with pros and cons, focusing on liability protection, audit risk, and tax return complexity. For example, LLCs are praised for their flexibility and ease of ownership transfers, while S Corporations are discouraged for holding appreciating assets like rental properties. The chapter also addresses nuances in ownership when spouses or family members are involved, particularly in community property states. Yay, family members!

We also answer the common question of “Should I put my rental property in an LLC?” Answer is Yes, but there are some reasons it might not make sense.

Further, it explores advanced strategies such as using holding and operating company structures, mixing different rental types within entities, and preparing for succession or exit scenarios. Here we go!