RONALD J. CAPPUCCIO, JD, LLM (TAX)


TAX, BUSINESS AND ESTATE ATTORNEY

QUESTIONS
856.665.2121

Acquiring Real Estate and LLCs

Should Real Estate be Acquired using a Limited Liability Company?

Benefits to an LLC for Real Estate Acquisitions:

  • Asset protection – if people slip and fall on property, they sue the LLC, not the individual owners.
  • If person dies in another state, the LLC avoids an ancillary probate in the State where the property is located.
  • Owners can gift a few shares of the LLC to their children without redoing the deed each time.
  • Discounted gifts can be made to children, thereby leveraging the gifts.
  • The owners can slowly give value of the asset away and maintain control.
  • Owners may not need as much liability insurance because LLC provides limited liability.  Still need some to avoid doctrine known as piercing the corporate veil.

 

Negative aspects to an LLC in Real Estate Acquisitions:

  • Transferring property to an LLC will void the title insurance
  • If the property has a mortgage it will trigger a large real estate transfer fee.
  • In theory, if there was a mortgage the lender could call the loan. This could happen if interest rates significantly increase.
  • When adding family members to LLC, it will trigger the need for a 1065 tax return – i.e. more accounting fees.
  • There is an annual fee for an LLC.