I am a teacher in Quincy and in addition to my salary I sometimes receive wages for tutoring, and also income from our rental property. Is it recommended and is there a way to organize these separate business activities under one business entity?
Organizing several side businesses under one umbrella may sound like a good idea at first but there are several reasons (for tax purposes and non-tax purposes) why you should keep all businesses separate. First, if you have all businesses in one entity (whether a corporation or a LLC) they are all at risk in a lawsuit. Using your facts, if a guest of your tenant slips and falls on the property they would be able to attach the income from the rental property as well as any tutoring income (if they get a judgment against the business). Also, losses from rental activities are treated very differently from all other business activities. If you generate a net operating loss from an activity you are materially participating in (tutoring would likely qualify), that loss can be used to offset income from other activities. However, rental activities are presumed to be passive activities (unless you can prove you are in the real estate business and devote significant time to that activity) and the losses that are generated can be limited. Putting any other activity in the rental activity entity might keep you from realizing those losses. You can achieve better results using more than one entity and you will likely get better protection for all your assets and income.
The Quincy Business Law Attorneys at Beliveau Law Group provide legal services from the start up to dissolution of a business in Massachusetts. The law firm provides legal representation to individuals, and businesses in Quincy and the Boston area communities including: Milton, Dedham, Weymouth, Rockland, and Randolph.