The Gift of Protection: Buying in an LLC

‘Tis the Season, both the holiday season and property buying season are here. I think Eartha Kitt in “Santa Baby” had the right idea that a deed under the tree would make for a perfect Christmas gift. The purchase of an investment property that hits all a buyer’s requirements ergo a new income stream is the perfect “December to Remember” gift. In the bustle of getting the just right investment property under contract, buyers should also consider giving themselves the gift of protection.

When making the leap from homeowner to real property investor, buyers should talk with their real estate attorney about the benefits of taking ownership of their new property in a Limited Liability Company (“LLC”). Privacy and asset protection are the most popular gifts of ownership in an LLC. Ownership of real property is public record and taking ownership without the use an entity discloses a landlord’s home address to tenants! A knock on the door when there is an issue at your investment property is the last thing any landlord wants on a Saturday morning. Asset protection is the greatest gift of ownership in a multi-member LLC when coupled with quality liability insurance coverage. This protection shields an investor’s personal assets and limits damages from lawsuits arising from the property, to the assets of the LLC and insurance proceeds. A sole member LLC still provides privacy, but the protection is minimal without liability insurance making quality coverage very important.

Buyers who want to consider buying in an LLC should take the following steps in their real estate purchase:

1. The Buyer should instruct his or her realtor to make the Contract for Sale and Purchase assignable. This allows the buyer to sign the contract in the buyer’s personal name and to assign the right to purchase the property to the entity once it is formed;
2. Consider name options and the address that the LLC will use. A popular option is “Address of the Property, LLC” as there should a unique LLC for each investment property. Apologies, but Get Money Honey, LLC is taken;
3. Call or make an appointment with a real estate attorney to discuss your entity and guide you. An experienced real estate attorney can assist you with the formation of your entity and explain your options; and
4. Get ready to be a landlord! Remember that the LLC is an entity that is separate from the investor. The LLC will have its own bank account, records, and insurance. Remember to not commingle the LLC funds with personal funds to maintain the asset protection benefits.
Our firm is full service and we have attorneys on staff that can answer any title, entity formation, estate planning, or tax questions about buying your next investment property in an LLC.

Sincerely,
Berlin Patten Ebling, PLLC

Article Authored by Kelly Roberts kroberts@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

www.berlinpatten.com

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