Transferring assets to a limited liability company (LLC) can bring both tax benefits and asset protection. A less structured body, an LLC offers more freedom than a company in the management of real estate assets. One-member limited liability companies also have the advantage of confirming profits or losses on a member’s personal tax return. This advantage, combined with the protection of liability provided by an LLC, makes the transfer of assets to the company an attractive option. When the LLC was formed, the process was similar to most real estate transactions.
Forming AN LLC
Hold a meeting with potential members of the LLC. Outline the company management plan and the company’s assets.
Drafting an operational agreement. The Agreement shall outline, in writing, the governance of the LLC determined by its members/managers. This step is not required for one-member LLCs.
Submit paperwork in accordance with the LLC’s operating status. Documents and requirements vary by state. The main document is often referred to as the “Certificate of Formation” or “Terms of the Organization.” Documents are usually submitted to the Secretary of State or the state Treasury Department.
Pay a subscription fee. As of February 2011, this fee ranges from $30 to $200, depending on the location.
Get a federal employee identification number (EIN) with the IRS. This can be done online, in person or over the phone.
Transfer of assets
Make a certificate between the current owner and the LLC. The certificates may vary depending on the type of security, the individual making the transaction, and the type of asset. Consult an attorney if you are unsure about how to prepare the document.
Draft a solution for the LLC to purchase the property. If the LLC receives funding as part of the process, this needs to be included in the solution. Get all the necessary signatures from members/managers of the LLC.
Arrange to pay any outstanding debts to the property, such as mortgages or home loans. Depending on the amount owed and the cash flow of the LLC, it may be necessary to have the finance to do so.
Perform the certificate. The certificate will need to be signed by the grantees( s) and members or managers (detailed in the executive agreement) of the LLC. Document noticing.
Submit documents to record at the county record office about the subject’s property. This will list the LLC as the record owner.
You should make multiple copies of the certificate in case the document is lost or damaged before recording. Lawyers can identify copies as “original copies”.