Summary: Holding Title To Real Estate in an LLC When you decide to invest in real estate, you'll have a choice as to how you want to hold title to your real estate investments. One choice is to hold title to real estate in an LLC (limited liability company). A limited liability company protects the individual owners from personal liability and for federal income tax purposes those investors can ignore the LLC when they complete their tax returns. The LLC exists but the owners can take the losses and gains from the investment directly on their individual tax returns. For these reasons, most real estate investors choose to hold title to their real estate investments in an LLC.
Holding Title To Real Estate in an LLC
Q: How do I sell my rental property to the limited liability company (LLC) that I have set up?
A: I’m not sure why you would want to sell your own property to a limited liability company which you own and control. Do you perhaps want to simply transfer the title to the LLC?
If you are talking about a true “sale” of the LLC, you would need to draft a contract for the sale of the real estate from you to the LLC. The contract would provide for the normal issues relating to title, survey and other matters relating to the sale of real estate.
At settlement, or closing, you would have documents transferring title from you to your LLC. You would file all of the normal documents relating to the sale of real estate with your state, county and local municipality. In addition, you would also have all the fees associated with the sale of a piece of property along with all the fees associated with the purchase of a piece of property.
In some jurisdictions, the transfer of title would trigger a reevaluation of the property for real estate tax purposes.
If your purpose in transferring the property is legitimate and you treat the transaction as is you were selling it to a third party at an arm’s length, you should be fine with the documentation and with the taxing authorities.
However, if you have a different motive, you could have problems with your transfer. If you value the property too low for real estate taxation issues, the taxing authorities could assess the property at a higher level and, in some cases, may have a claim against you for fraud. Some municipalities and other governmental bodies require that a sales price reflect a true market sales price or you have to disclose that the sale wasn’t undertaken under true market conditions.
Now if you are merely trying to transfer ownership of the property from your name to an LLC you have created to hold your real estate, you can do it less formally. You may only need to draft the documents that would convey title from your name to the name of the limited liability company. You may decide to use a quit claim deed or a warranty deed. In some jurisdictions, quit claim deeds can cause a headache down the line, though in other places, quit claim deeds are a perfectly fine choice.
You should talk to an accountant about the transfer of the property into the LLC. You don’t want to have a situation where you transfer the property to the LLC but for federal income tax purposes, the transfer is considered a sale of the property and is taxable to you. You need to make sure that the transfer will not trigger any federal income tax issues.
If you transfer the property from your name to the LLC and you are the sole owner of the LLC and elect to be treated as a corporation for income tax purposes, the transfer should be ignored for federal income tax purposes. It would be as if you and the LLC were the same for federal income tax purposes.
For more Limited Liability Company Articles and how to hold title to investment properties read on](http://www.thinkglink.com/llc).
Forming LLC For Investment Properties
LLC vs Corporation: Is An LLC Better For Real Estate Investing
Quit Claim Deeds For LLC
Transferring Rental Property To LLC
Creating an LLC for A Rental Property
Understanding LLCs For Rental Properties
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Comments
Viren says
When you transfer from a individual to LLC, that is a change in agreement that was done with the lender. In that case, lender could call to pay all the loan because you change the agreement. Lender has a right to do that. They may choose to do that but not necessarily always do that. then is not this a risk or a problem?