LLC vs. S Corp — An Overview of Choosing a Structure for Your Rental Property Business

　　Bottom line: Most rental property owners are better off with an LLC; an S Corp only makes sense for "active" real estate professionals.

　　When deciding how to structure a rental property business, the choice between an LLC and an S Corp affects taxes, liability protection, and administrative workload.

　　LLC advantages: Easier to set up and maintain, strong liability protection, and pass-through taxation. Rental income flows directly to your personal return, is generally considered passive, and is typically exempt from self-employment tax. Ideal for landlords with one or two properties or a long-term buy-and-hold strategy.

　　S Corp advantages: Allows income to be split into a reasonable salary and shareholder distributions, reducing self-employment tax. But because rental income is usually already passive, this benefit rarely applies to traditional rentals. S Corps are better suited to active real estate professionals who manage properties full-time or flip houses.

　　Costs and complexity: LLC formation costs roughly $40–$500, with low maintenance. S Corps typically cost $800–$3,000+ due to payroll, compliance, and additional filings, and involve far more administrative complexity.

　　In one sentence: For passive rental income, an LLC is simpler and cheaper; only consider an S Corp if you are actively operating and earning significant active income. Always consult a tax professional.