LLC in both mine & my husband’s names? Or just one?

Question

Is there a strategy or good reason to only put our LLC in one of our names versus both of our names? I already have my own business unrelated to photography, so I already have an LLC without my husband as part of it.  Just curious if there would be any reason why one of us should keep our name off of our real estate LLC when it comes to investing purposes. Thanks for any insight on this!

Joshua B. · Answer

Couple things. There can be tax consequences for future transfers of the property based on who the owner(s) of the LLC are and who the property is being transferred to.

Also, if you're paying cash, it's fine and relatively easy to put the property in an LLC. If you're hoping to use a conventional loan, you won't even be allowed to purchase with an LLC. Some people buy in their own name and then transfer the property to an LLC but you're not really supposed to do that as it generally is a breach of the loan documents (Google a 'due on sale clause').

I'm a Michigan attorney and I don't use an LLC for my purchases (yet). Maybe in a few years when I'm older and (hopefully) wealthier but not now. I just keep a liability umbrella policy on myself.

I definitely wouldn't mix your rental business with your photography business. Better to keep those separate.

Charles Kao · Answer

@Nikki Closser Putting an LLC into your name or into both of your names is not permanent so you can change easily.  I had a single

member LLC starting out as it saves a business tax return and easier to get qualified for loans because only underwriting one member.  On the flipside when you have properties on your personal tax return even if held in business name some banks require calculating it it into your personal DTI so this could be a nightmare as you accumulate more properties. I would be asking your CPA what they think and if you don't have one then your mistake is not having one.

Nikki Closser · Answer

@Joshua Birk Thanks so much for the info! My photography studio is in downtown Plymouth :) I'm actually not going to use the LLC to buy properties (yet) or to even transfer them. I'll be using the LLC to loan us money to buy properties. So, essentially, the LLC will be our private lender. Curious who you have your umbrella policy through? I have one for my business, but not for me personally!

Nikki Closser · Answer

@Todd Rasmussen this is so helpful, thank you so much. I was hoping to hear from someone else who researched this method for avoiding season periods. Appreciate it!

Todd Rasmussen · Answer

There is a way to transfer property to LLC officially. https://www.biggerpockets.com/member-blogs/12249/86026-transfer-property-to-llc-without-fearing-due-on-sale Agree with Josh's cautions!

Nikki Closser · Answer

@Charles Kao thanks for the info! I've had a CPA for many years and we had a good discussion, but he's not a real estate investor and I was curious what other investors do/think.

Joshua B. · Answer

Downtown Plymouth is the best! Moved out about two years ago and I miss it and want to be back. If you hear of any off market leads,  let me know!

Todd Rasmussen · Answer

@Nikki Closser

Bummer, who knew I'd find a reason to live in CA? Maybe two LLC's, one in each of your names to split assets?

And looking at your previous post, it looks like you are doing this to avoid seasoning periods?

Moving money back and forth between a single member llc and your personal funds does not have tax consequences. I don't think the same can be said for if you and your husband both are members. I'd talk to a lawyer and an accountant. Even though there isn't a tax reason to maintain good records, you will have to maintain strict paperwork showing that you are in fact loaning money to yourself from an LLC. What you are considering passed muster with my accountant, lawyer, and title company but you should check on your individual circumstance with similar professionals in your state.

Nikki Closser · Answer

I’m in Michigan and it is not a community property state.

Todd Rasmussen · Answer

@Nikki Closser

Do you live in a community property state? I think there are advantages to single member llc's for tax purposes, but I wouldn't do it in only one name. (In community property states husband wife owners of LLC are considered single member) I'm an advocate of combined financials.

LLC in both mine & my husband’s names? Or just one?

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