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  1. #1
    Join Date
    Oct 2014
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    Default Re: LLC Ownership of Rental Property

    Quote Quoting PHD_4_U_N_Me
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    1) What is the proper way to take an existing rental property that one personally owns, and transfer ownership of that property to an LLC that you also own?
    There several ways you can do it. I'll mention the two most common ways for doing it if you want to really do it right.

    First, you enter into a contribution agreement with the LLC in which you agree to contribute the property to the LLC in exchange for more member interest in the LLC, which the LLC formally approves and records that approval in its records along with a copy of the agreement. Then you execute a deed transferring the property from you to the LLC and have that deed recorded. This could be a quit claim deed. At the time you execute the deed, the LLC issues to you the additional member interests and records that in its records. As you are the sole member of the LLC, the issuance of additional member interests will not affect the control of the LLC.

    The second is to sell the proeprty to the LLC. Here, you would enter into a sale agreement with the LLC, which the LLC approves and records that approval in its records along with a copy of the agreement. You execute a deed transferring the property to the LLC at the same time that the LLC gives you a check for the purchase price. The deed is then recorded. The sale price should be fair market value.

    Both methods involve a lot of paperwork which may seem a bit excessive when you are dealing with an entity that you control 100%. But you need to always bear in mind that you need for all of your dealings with the LLC to be business like, as though you were dealing with an entity that someone else owns. If you don't do that and you cut corners for the sake of convienence you may put at risk the limited liability protection the LLC offers you.


    Quote Quoting PHD_4_U_N_Me
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    2) Same scenario above except, you are buying a brand new rental property. Is it best to have the LLC buy the property itself, or to buy the property personally and then transfer ownership of the property to the LLC.
    You can do it either way, but it will be easier if the LLC simply buys it. Otherwise if you buy it and transfer it you are doing in two steps (with all the extra paperwork) something that could have been done in one step.

    Adjusterjack is right that the limited liability protection of the LLC is not as extensive as some people believe, but unlike adjusterjack, I would not say that there is no advantage to using a LLC. There certainly can be, depending on the details of what you plan to do. Especially if you take on partners or hire employees/dependent agents to do work for your rental properties having a LLC can be invaluable. It can also be useful in limiting personal liability in contract disputes with your tenants.

  2. #2

    Default Re: LLC Ownership of Rental Property

    If you are the only owner of the LLC, you would report your taxes the same way you probably do now, assuming you're a sole proprietor. That simply means you own rental property but are not a legal entity. If your LLC has more than one owner, such as you and your spouse, the LLC files a separate tax return.

  3. #3

    Default Re: LLC Ownership of Rental Property

    Here are eight steps on how to transfer property title to an LLC:

    1. If you have a mortgage on the property, contact your lender.
    2. Form an LLC, if you haven’t already.
    3. Obtain a Tax ID number and open an LLC bank account.
    4. Obtain a form for a deed.
    5. Fill out the warranty or quitclaim deed form.
    6. Sign the deed to transfer property to the LLC.
    7. Record the deed.
    8. Change your lease.

  4. #4
    Join Date
    Oct 2014
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    8,238

    Default Re: LLC Ownership of Rental Property

    Quote Quoting settlementquick
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    Here are eight steps on how to transfer property title to an LLC:

    1. If you have a mortgage on the property, contact your lender.
    2. Form an LLC, if you haven’t already.
    3. Obtain a Tax ID number and open an LLC bank account.
    4. Obtain a form for a deed.
    5. Fill out the warranty or quitclaim deed form.
    6. Sign the deed to transfer property to the LLC.
    7. Record the deed.
    8. Change your lease.
    There is a bit more to it if you really want to do it right. The OP may want to see a business or real estate attorney to see exactly what ought to be done. After the first time or two of doing it it may not be necessary to have a lawyer to do most of what is needed.

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