Transferring deed to LLC: Consideration and Transfer Tax?

[Yuri Couto]

Hello,

My father is seeking to transfer a paid off SFR rental property in Florida from his name to a newly formed LLC, under his and my mother's administration.

I have researched that there is a transfer tax based on the "consideration" of the exchange in title owner. 

Is it possible to have the consideration be something minimal, like $10, or does it have to be the actual appraised value of the house? If charged transfer tax on the appraised value, that would be thousands of dollars. Note we are not actually selling to a buyer, only transferring ownership to my dad's new LLC.

How can we minimize transfer tax in Florida for this?

Thanks for your help!

[Raquel D.]

I don't know the legal implications or anything about Florida transfers, but in many states, the difference between a quitclaim deed and a grant deed (or warranty deed) is just title assurances. It has nothing to do with transfer taxes. Transfer taxes generally relate to consideration paid. So if someone is using the property they own to fund an LLC they also own, there isn't consideration paid, so no transfer tax.

To distinguish the difference:

- Scenario 1: Someone starts an LLC, "capitalizes" (funds) it with $300,000, and then uses the $300,000 in the LLC account to purchase a property. The LLC is paying consideration for a newly acquired property, so consideration is paid. Therefore, when recording the deed transferring interest from old owner to new LLC, transfer taxes are due.

- Scenario 2: Someone owns a property as an individual. That same person establishes an LLC and transfers the property into the LLC -- hence "capitalizing" the LLC with the property. No consideration was paid. Therefore, in the deed from the individual to the LLC, no transfer tax is due.

The county recorder/register of deeds might actually answer this too - they can't give legal advice but asking a question just to confirm you're right is fine, i.e., "if I own a property and transfer is to my LLC, I don't owe transfer taxes, right?"