Can my LLC "buy" a property from me?

Question

I have a few properties under my name that I'd like to put under an "anonymous" LLC solely for privacy reasons. I know that I can simply quit claim the properties to the LLC, however this leaves a trail on the auditor website for my county, which would show that I transferred a property via quit claim to an LLC for $0... which makes it pretty clear that the LLC belongs to me.

I'm wondering if there are any sort of repercussions, or if it's even allowed, to "sell" your own property to your own LLC. In this situation, it'd be me funding the (single member) LLC with X amount of money, that would then be used to "purchase" the property from myself for X amount of money. That way on the auditor website, it looks as if I sold the property to a third-party company that is not affiliated with myself. I'm imagining there's some tax implications, but not certain if that can be dealt with.

I'd love to hear some advice.

Also, just to be clear, I'm aware that putting properties in an LLC doesn't entirely shield me from the public view. I'm simply more concerned about shielding myself at least to some extent from nosey, prying eyes -- whether that be tenants or family. I'm a very private person, so the more privacy I'm able to have, the better. I've already had some people look me up on the auditor site with the intentions of buying my properties from me, so I can only imagine what someone with more hateful intentions might do with such information.

Adam Martin · Answer

I’m not sure about the privacy aspect but am curious if anyone can comment on the tax liability of this.  I would assume if you sold from your personal name to an llc wouldn’t you owe capital gains and depreciation recapture.  I assume so and if that is the case seems like it may be a steep price to pay for a couple extra layers of security.  If your relatives are as nosy as you say where they look at tax records have you thought of a response on why you sold all your properties.

Sam Yin · Answer

Just about every problem in life can be solved by money. I venture to say that this one can easily be solved by money. The question is are you willing to pay the cost for this perceived anonymity? Does the nosey relatives have a reason to pry and if they did, how does that affect your existence? Would it put you in harm's way to the point that it would cost way more than the cost to create this anonymity of ownership?

Something like this crossed my mind once for a brief moment. I think it had to do with seeing some add from Clint Coons on LLCs from WY and DE. After thinking about it and all this is entailed, I quickly realized these firms capitalize on fear. It made more sense for me to have an umbrella policy and use a living trust. With the addition of LLCs, it was not for anonymity but rather to contain liability based on equity.

My thought is that the anonymity thing is a bit overrated.  Someone who was intent on doing you harm,  as it related to the knowledge of your ownership of an asset(s) is going to figure out a way.  But then again, I'm not in your shoes and I have a very small portfolio. Im pretty open in my circle about REI because I feel they should all get into it and grow their wealth, if they want to. I have nosey relatives that scratch now an then, but they would never put in the work to attain assets. I may rethink this if I had over a $B in equity... or if something drastically changes in my life.

To your point, you seem to admit you are a private person and have some anxiety about it all. Then perhaps the cost to hide it all is worth the better night sleep. Money can solve just about anything.

Luis Alvarez · Answer

@Alex L. I hope this helps (from my estate planning/asset protection POV):

It sounds like both you and the properties are in OH, thus, I would establish a holding LLC (in OH is fine) that would in turn own the rental property LLC (IE "123 Main Street LLC" is owned by "Alex Holding LLC").  Now to transfer, I would execute a Grant Deed, not a Quitclaim Deed, b/c a Grant Deed conveys all the title covenants stating that title is free/clear and is the Grantor's ("Seller") full interest to convey to the Grantee ("Buyer").  A Grant Deed contains the language "for valuable consideration paid", and won't need to necessarily disclose what the consideration (price of the transfer) is on there. When the Property LLC is looked up, the Holding LLC is shown, because it was made the manager-member of the Property LLC, and a Registered Agent office can be the only actual physical address/contact that would be found on the Secretary of State site.

Now regarding the assessment/transfer taxes, I'm not experienced with OH assessors, but when these transfers are made for estate planning/asset protection purposes you can typically relay to the assessor's office that ownership did not fundamentally change (when you provide them with an explanation of your structure) and that typically straightens out any re-assessments they may make due to change in ownership.

Regarding you "selling" the properties to yourself, I don't have a tax background, but depending on how your LLC is taxed (I presume it's currently a pass-through) you would be essentially borrowing from Peter to pay Paul...it all goes back to your 1040 anyways.  If you had partners or other members involved and it was treated as a partnership or s-corp (for tax purposes) that would likely be a different conversation.

I know there's a LOT of information out there regarding LLCs, anonymity, etc. Some correct, some misleading, some conclusive, but most of it doesn't apply to every person's situation...because as lawyers say: "It depends".

I personally have a similar structure and when having some reverse checks on myself, all you could really find online is that at some point I personally owned certain properties. :)

Alex L. · Answer

Thankfully I don't have an out of state LLC. I only have an LLC in the state where I invest in -- Ohio. A lot of people seem to think that you can't have an anonymous LLC in Ohio, but the truth is that you can; the formation documents clearly state that a member, manager, or other authorized representative can sign to form the LLC. In my case, I had a law firm handle it, so my hands are clear of the LLC from a public standpoint. Not trying to over-explain the details to you... just saying in case someone else in OH is looking for answers regarding anonymous LLCs, because I spent a long time searching high and low with no definitive answers.

I definitely know that my personal info can always be tied back to the LLC one way or another. But my goal is just to make it harder to do so... adding a few extra layers of security, if you will. I use a Google Voice # for all business-related aspects that has no ties to me, never use my real name when dealing with tenants, and property tax payment details in my county either aren't public or they're not easily accessible unless you go physically go downtown. Obviously, if someone wants to find out who is behind the LLC, nothing is impossible, and besides, a subpoena can easily do that. But, again, I'm just trying to get a bit more privacy on the surface, and not necessarily trying to hide myself for the purpose of avoiding lawsuits or something like that. I've never had to evict a tenant thank goodness, but god forbid I did, the last thing I'd want is for them to easily find my name and address on the auditor website and show up on my doorstep (which I've heard horror stories about). In that same vein, I'm pretty confident a tenant won't spend the time and money paying a skip tracer or private investigator to locate the owner of the LLC when they couldn't even pay their rent.

However, if they have two braincells and know how to click the "Transfers" tab on the auditor page, where they can see I quit claimed the property to the LLC for $0, they'll figure out that I'm the owner.

I guess thinking about the "why do I need anonymity?" question, I've checked plenty of times on the auditor website to see who owned a property, saw that it was quit claimed to an LLC for $0, looked up the LLC, and confirmed the owner of the LLC was the previous owner of the property. So, knowing that I've done it before and have seen how easy it is to get that info just on the surface, makes me worried that someone with bad intentions might do the same thing. So, in short, the answer would be that I'm simply neurotic and paranoid. That's it and that's all. I have no bad intentions. Just anxiety about others who might, lol. Also, I do prefer to keep info about my assets from non-immediate relatives... I've a ton in the area, and good lord are they nosey.Apologies for such a long response. I lack brevity. I think I'll consult an accountant that has in depth experience about real estate and LLCs and see what they have to see on the matter in terms of tax implications.

Nathan Grabau · Answer

You could certainly sell your properties from you to your LLC and transfer through a special warranty deed. This is going to make it look like a sale. It is important that the sale takes place at full price. It is even possible that you could take out new debt(that you would likely have to personally guarantee) from a local bank against these properties. Only down side is the transfer is going to be more expensive.

That all being said, I do not know of anyone who would be savvy enough to know what the quit claim deed was for, but would not be savvy enough to figure out that you owned the LLC.

Chris Seveney · Answer

@Alex L.

There is a difference between selling and transferring

If you transfer it may not be considered and arms length transaction for asset protection

If you sell it and actually transfer funds based on market rates etc thst is a different story and is perfectly fine

Nathan Grabau · Answer

Some states require registrations of out of state LLC's to operate in them. For example, even though Iowa law did not require it, my lender in Iowa required that I register my Colorado based LLC that holds property in Iowa, with the Iowa SOS. Just some food for thought that anonymity really does not exist, in anyway that is meaningful. Just some other examples:

If you self manage, reverse phone number search... historic property tax bills... an asset search... LLC skip tracing.

I would spend more time working through the "why do I need anonymity?" question before you spend a ton of money and get hit with cap gains tax and all these other things. Most likely, that why, leads to an answer of being concerned with someone who is sophisticated enough to find you even through the LLC.

Alex L. · Answer

Thanks, Nathan. The thought process is that if someone were to look up said property on the auditor website, and see that the LLC "purchased" it from myself for a reasonable market price, then that someone would not make any direct connection between myself and the LLC. The LLC in question is anonymous, in that when looked up on the state registry it does not show ownership or management information -- only that the Registered Agent and individual authorized to form the LLC is an attorney's office. So, is someone were to look up the LLC, they wouldn't be able to tie me to it with a simple Google or business registry search.

On the other hand, if someone saw that the property was simply transferred to the LLC for $0 from myself, then it makes it pretty obvious that I'm the only behind the LLC because who on earth would practically give a property away to a company?

Now I just need to figure out tax implications.

Alex L. · Answer

The bottom line is that I am simply an anxiety-ridden individual with OCD among a slew of other 3 and 4 letter acronyms, and so I am absolutely willing to pay the price for a better night's sleep assuming it's not an exorbitant amount (and while also understanding and agreeing with you that anonymity is overrated because if someone truly wants to cause harm, they will find a way). The perceived anonymity is just a little extra layer that helps me sleep better at night, knowing that most people won't dig too deep unless there's a valid, reasonable purpose. Ever since organizing my anonymous LLC and purchasing/holding properties solely through it, I haven't received a single unsolicited communication from outside parties offering to purchase them, and just that peace alone is so nice to have. I also hang out in a few spaces that aren't exactly landlord friendly (simply the crowds that I run with; I have no interest in changing this, and have since learned to live with my conflicting interests), so I enjoy having as much distance between myself and my investments as I can get.

Bud Gaffney · Answer

@Alex L.Yes

Can my LLC "buy" a property from me?

Most Popular Reply