A TIC investment can be very profitable and well worth your time, but before you get too far into it you need to be aware of all that is involved here and learn about the different elements that are contained within the investment.
TIC: LLC Placement
A TIC: LLC placement refers to a limited liability company which is a type of business entity that is one of several forms of legal business organization. It is important to decide if LLC is the best entity for your business in particular, because this is not always the case.
TIC: LLC placement companies are a bit of a hybrid of other forms of business. They are treated more like partnerships, particularly for tax purposes. There are a few characteristics of TIC: LLC placement that you should be aware of, including the fact that all members of the LLC have limited liability.
LLC owners are referred to as members rather than partners, and one-person LLCs get sole proprietor treatment. As well, earnings with an LLC are subject to self-employment tax, so this is a situation where some people prefer an S corp, where the profits from the corporation are subject to ordinary income tax but not to self-employment tax.
Flexibility is one of the key draws to a TIC: LLC placement, as the LLCs carry fewer placements than other entities. They are easy to operate, easy to get into, easy to control, and offer the possibility of great profit.
The members involved in the TIC are able to decide on their own how they want to split the profits and this adds a lot of convenience and removes a lot of the hassle. There is no limit on the number of members that an LLC can have, which is another major advantage.
The LLC is such a terrific, flexible entity, but remember that there are certain risks and downfalls that are possible with it as well. There is the self-employment tax issue for one, which is something that tends to turn a lot of entrepreneurs away, but which should not always be discouraging. Because LLCs are formed at the state level and states differ in regards to their individual tax treatment, there may be certain issues that you will need to be concerned with depending on which state you live in.
Make sure that you are aware of all the details before getting into this, and make sure that it is going to be a worthy investment for you.
Kathryn R. Landry is a business writer for TIC Advisors, Inc. A company that can give you the most complete information on a 1031 exchange or TIC property ownership.
