Transfering title to LLC

[Ashish Maheshwary]

Hello everyone,

I am a new investor and am trying to set up my business entity before I dive into the game. I have talked with 2 attorneys and both have given me the opposite advice. One said to create a LLC (single-member) and the other said an LLC is not necessary when first starting out if you have good insurance with an umbrella policy.

I am still leaning towards the LLC at this point because of the asset protection it offers. My concerns about LLCs are the following:

1. If I buy a property and transfer title to the LLC and the lender finds out, will the lender call the loan? Should I even notify the lender?

2. If I want to later refinance the property, should I transfer the property back to my personal name?

3. Let's say I transfer the property to my LLC, the lender finds out and gets pissed. Will transferring it back to my name satiate him or will I get in some kind of trouble?

4. Are there any LLC-friendly lenders that will allow me to take title cleanly into the LLC?

4. Lastly, if transferring title to an LLC is so much trouble, is it truly worth it?

Thanks so much for your time.

-Ash

[Mitch Kronowit]

Received a reply from one of my attorney's regarding the insurance (and mortgage) issue.

First off, the more names you can place on your insurance policy, the better. So no problems there. Having your name appear along side your entity does not prove "alter ego".

Regarding the other issue, which is actually discussed in another thread (hey, why not kill two birds with one stone?), I asked about transferring a rental property into an LLC while keeping the mortgage in your own name. He advised to keep it quiet. There is no reason to inform the lender because they may exercise the "due on sale" clause. As long as the LLC is on title and the deed has been recorded as a public record, it shouldn't matter who holds the note.

He also went on to say the courts look at a wide spectrum of factors when trying to determine "alter ego". The important thing is to maintain your entity as best you can, observing as many policies, practices, and formalities as possible. He said some attorney's may try and build a huge case out of several trivial matters, but all that usually results in is a large legal bill for their client. :mrgreen:

Another law firm, Drosman & Percival, LLP (Irvine, CA) state that setting aside the corporate veil and enforcing the Alter Ego doctrine has been regarded as an "extreme remedy" by the courts and rarely used. Even my own father, who attempted to have corporate shields set aside in court while working for the State of California, said it was a very difficult thing to accomplish.