Married couple - do we need two LLCs?

[Grace R.]

My husband and I have an LLC (incorporated in NV but we live in CA) in which we have 50/50 ownership. We currently 3 properties: a CA rental property in his name, an IL property in my name, and our primary residence in both our names. We plan on continuing to purchase properties in our individual names until we max out our available slots. And we were going to transfer the rental properties into the LLC, starting with my husband's CA rental property.

However, our lawyer is saying that in order to avoid reassessment (and likely a higher tax bill), we'd have to claim the Proportional Interest Transfer Exclusion but this won't work in its current state because my husband currently owns 100% of the CA Property and only 50% of our LLC.

I'm thinking we may have to open up a second LLC in which I have 100% control and change ownership on the one that's already open to 100% control in his name? And that means $1600 to the FTB every year :( Any advice on what to do would be greatly appreciated!! TIA and happy holidays!

[Jeff Rabinowitz]

You may not need an LLC at all. There are divergent opinions on the benefits of owning rental properties in LLCs. (If you search on BP you will find hundreds of threads discussing this.) If you do not operate or document them correctly (many investors do not) they may provide limited value. On the advice of my attorney, I never held my rentals in LLCs and in Michigan it only costs $50 to establish an LLC and a $25 annual fee.