Real Estate Purchases by LLCs
While commuting to work on the subway, you may have once passed the time by reading a longform news story about one or another shady character who managed to conceal his money laundering, his extramarital affairs, or worse by titling much of his property, including real estate properties, in the names of limited liability companies (LLCs). On the other hand, you might have founded an LLC at the early stages of a business project that may or may not ever have gotten off the ground; registering an LLC is as simple as submitting a form to the IRS. In theory, anyone can establish an LLC and make it buy a real estate property, but if your goal is just to buy a house and live in it, then making the house belong to your LLC instead of to you adds unnecessary layers of time and expense. To find out more about titling a real estate property in the name of an LLC, contact a Bronx real estate attorney.
What Does Limited Liability Mean in the Context of Real Estate Properties?
The identifying feature of an LLC is that it cannot be held legally responsible for the debts of its owners and vice versa. In other words, the main motivation for founding an LLC is asset protection. Founding a new business is risky; most businesses close within five years of their founding, without ever having become profitable. By incorporating your business as an LLC, you can avoid having to use your personal funds to pay your company’s debts, especially if the company closes.
Beyond that, no two LLCs are alike. Your LLC’s operating agreement, which you must file with the state, indicates the details of how the LLC works. It is possible that the purpose of the LLC is to buy a house and be responsible for expenses associated with it. This is a popular option if the house is an investment property. If the house belongs to the LLC, then if a tenant gets injured and files a premises liability lawsuit, the LLC will be responsible for paying, but its owner will not.
Furthermore, real estate transactions are a matter of public record. People used to buy LLCs so that it would be hard for the public to find out who truly owned the house; new laws require greater transparency, though.
LLC-Owned Real Estate Properties and Your Estate Plan
Sometimes people transfer ownership of houses to trusts so that the house will not become part of the estate during probate. In theory, you can do this with an LLC, but only if the LLC’s operating agreement says that the LLC will not become part of the estate. If your LLC doesn’t have an operating agreement, it will go through probate just like the rest of your property.
Schedule a Confidential Consultation With a Bronx Real Estate Attorney
A real estate lawyer can help you make wise decisions about buying a real estate property through an LLC. Contact Cavallo & Cavallo in the Bronx, New York to set up a consultation.
Source:
northwestregisteredagent.com/llc/buying-a-house#:~:text=Yes.,tax%20implications%20that%20can%20develop.
