LLC vs S-Corp: Which Structure Is Best for Commercial Property Owners?
- Nate Jones, CPCU, ARM, CLCS, AU
- Oct 15
- 2 min read
When investing in commercial real estate, one of the most important decisions you’ll make is how to structure your business. Two of the most common options are the Limited Liability Company (LLC) and the S-Corporation (S-Corp). Both offer liability protection and pass-through taxation, but they differ in management flexibility, tax treatment, and compliance requirements.
Let’s break down the pros and cons of each to help you decide which structure best suits your commercial property portfolio.
LLC: Flexibility and Simplicity
An LLC is a state-level legal entity that offers limited liability protection and pass-through taxation. It’s ideal for property owners who want operational flexibility and minimal administrative burden.
Pros:
Simple formation and management
No limit on number or type of owners
Flexible profit distribution
Pass-through taxation (income taxed at individual level)
Easier to transfer ownership
Cons:
All profits are subject to self-employment tax
Less tax optimization compared to S-Corp
May not be ideal for high-income investors
S-Corp: Tax Efficiency for Active Investors
An S-Corp is not a legal entity, but a tax designation elected through the IRS. It allows owners to split income between salary and distributions, potentially reducing self-employment taxes.
Pros:
Salary subject to payroll tax; distributions are not
Potential savings of $5,000–$15,000+ annually in taxes
Pass-through taxation
Strong audit protection if structured properly
Cons:
Must pay “reasonable compensation” to owners
Requires formal structure and more paperwork
Not ideal for passive real estate income
Which Is Best for Commercial Property Owners?
If you’re a passive investor with rental income, an LLC may be the better fit due to its simplicity and flexibility. If you’re actively managing properties or running a real estate business with significant income, an S-Corp could offer substantial tax savings.
Income level
Management style
Growth plans
Tax strategy
Protect Your Investment with Wexford Insurance
No matter your business structure, protecting your commercial property is essential. Wexford Insurance offers tailored coverage for LLCs and S-Corps, including:
Lessors risk insurance for leased spaces
Business interruption coverage
Custom policies for apartments, office buildings, retail, industrial, hotels, and more
Final Thoughts
Choosing between an LLC and S-Corp depends on your goals, income, and how actively you manage your properties. Both offer protection and tax benefits—but the right choice can save you thousands. Contact Wexford Insurance today to protect your commercial property and get expert guidance on coverage.
FAQs
1. Can I switch from an LLC to an S-Corp later?
Yes, you can elect S-Corp status for your LLC by filing IRS Form 2553.
2. Is an S-Corp better for active real estate businesses?
Yes—especially if you’re earning $60,000+ annually and actively managing operations.
3. Does Wexford Insurance cover both LLC and S-Corp-owned properties?
Absolutely. Wexford provides comprehensive coverage for all entity types and property classes.
