Lease Agreement between building and business I own under different LLCs? What legal advantages if any does this give me?
I'm in the process of purchasing a building to house my business. I set up an LLC to purchase the building. My lender is asking if I am going to set up a leasing agreement between the 2. What advantages (if any( are there to do this?

My accountant said  "since the biz is treated as a schedule c and doesn’t file a separate return and since the building LLC that will own the building will be owned by the same folks and we plan to elect out of partnership treatment, then for tax/financial, I don’t see a reason for a rental agreement. The biz will simply use the building"

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And yes I know I should ask a lawyer. I am at the top of my budget here to buy this thing and I need to save where I can. I was hoping you lovely folks could point me in the right direction so I can educate myself enough to see if this is something I can and should do. 

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Thanks Y'all! I've learned so much from this great community!
[{"id": "igyj2ry", "text": "Could be that from a lenders perspective it is easier to underwrite the deal with a lease rather than the underlying business. \nIt may also may sense from a tax perspective - the lease payments are a business expense. Then the entity holding the building can be structured that there wouldn\u2019t be any income tax due - interest on loan, depreciation etc. \n\nDisclaimer - I\u2019ve never been involved in such a transaction, simply sharing ideas.", "replies": [], "depth": 1}, {"id": "igyj92r", "text": "The lender really cares about what happens in when you default on your mortgage payments.  The lease will make it more clear what happens should you stop making your mortgage payments.  This could both work for you or against you I suppose.  Your doing an LLC, i imagine, to limit your liability but the lender may want to see certain items on the lease such as an equitable rent and personal guarantee.  I would ask your lender what they are looking for.\n\nNot a lawyer.  Don't cheap out on legal, you should really be asking a professional who know the laws that apply to you to really understand the what and why.  The best thing you can do is be prepared with as much information as possible so the attorney can quickly understand the situation.", "replies": [], "depth": 1}, {"id": "igyjyk0", "text": "Ask your real estate attorney handling your closing to write up a lease and save it with your corporate books and records. Ask your CPA to recommend a way to calculate market rent to justify what you are paying in rents in case of audit.\n\nWe own two commercial buildings in an LLC that my wife uses for her business which is an S-Corp. We have written, signed leases for both buildings.\n\nIn the last 10 years we have been asked to produce the lease when we were refinancing a 3rd  property also owned in the LLC and twice when we applied for PPP loans during the pandemic.", "replies": [], "depth": 1}, {"id": "igyweke", "text": "You can own at as schedule E real estate for your schedule C business but that opens your personal assets up to liability. The biggest reason to own the real estate in a separate LLC is to put a firewall up between your business and personal assets.\n\nHave an OC and EPC structure is also the preferred structure by lenders and others have said before me.", "replies": [{"id": "igz7ozm", "text": "Single member LLCs are disregarded for taxes. That has nothing to do with personal liability.", "replies": [], "depth": 2}], "depth": 1}, {"id": "igyzg7o", "text": "Having two separate LLC\u2019s is critical. I\u2019m not sure what your business is but let\u2019s say a client wants to sue your operating business,LLC if set up correctly, they can\u2019t pursue the asset in your other company, since they dealt and contracted with your operating business. \n\nIt\u2019s called Op Co Prop Co strategy (operating company/property company strategy) And there\u2019s tons of YouTube videos about it\n\nMessage me if you want to talk about anything in detail I\u2019m available, Not a lawyer but I have been a director of real estate operations for commercial real estate for the last 12 years which included five automotive dealerships that were single tenant triple net to ourselves meeting we operated the business under one LLC in the building and that paid rent to Property Company , there are many benefits.\n\nWe also owned 15 other commercial properties with multiple commercial tenants outside of the automotive industry that we did not own the operations of", "replies": [], "depth": 1}, {"id": "igz7fkh", "text": "Maybe your accountant doesn't want to deal with the self-rental rules (or isn't aware of them). Don't take legal advice from an accountant. Absent a lease, the business LLC doesn't have any right to use the building belonging to the real estate LLC.\n\nWithout rent coming in, the real estate LLC will likely be under-capitalized. The lender is wondering where it is going to get the money to make the mortgage payments. If it is under-capitalized, then it may as well not exist because it will not provide you proper liability protection.\n\nIt's possible that, for one reason or another, ownership of one LLC will differ from ownership of the other LLC. If that ever happens, then the business LLC could lose use of its location on extremely short notice absent a lease in place.", "replies": [], "depth": 1}, {"id": "igz8d36", "text": "There are two separate motivations here: legal liability and tax liability. \n\nFrom a legal perspective more LLCs will create more protection. We typically do PropCo OpCo structures if that is a primary concern. \n\nIf you do owner occupied financing, you can\u2019t split those out. So the financing costs can outweigh the risk. \n\nAs far as I know, your CPA is saying there is no tax advantage so it\u2019s up to you whether legal motivation is worth it. \n\nAlso: easier to exit one or both if you split now.", "replies": [], "depth": 1}, {"id": "igzbxip", "text": "If you file it on schedule C, and you own it all, setup the rental agreement, do some research on what a reasonable rental rate would be to establish what you want it to be. The rental income isn\u2019t subject the self employment tax so there is some tax savings. It\u2019s also a self-rental so will still qualify for QBI and exempt from additional Medicare taxes on investments, just need to handle correctly. Also need to make sure that the depreciation doesn\u2019t push you to a loss because a loss is still passive if it happens. Your account should know all of this, and know how to better handle the return prep side.", "replies": [], "depth": 1}, {"id": "ih2o59m", "text": "EPC and OC", "replies": [], "depth": 1}, {"id": "ih2pc05", "text": "100+ property owner.  Yes, you need to separate the entity which owns the property and the entity that is leasing the property.  Treat both as separate entities.  It is the proper method to conduct business.  You, as the owner of both, is also a separate entity.\n\nThere are two primary advantages.  First, passive income is taxed less.  Second, you control the rent.  Have a lease where the rent is high, this increases the value of your property.  At some point you may leave the business and will lease the property.  Also, taking Member Withdraws from the property ownership entity is better for tax purposes.", "replies": [], "depth": 1}]