Due on Sale Clause... Ways to transfer to trust or LLC?

[Josh Calcanis]

BP,

I've been searching and there are number of LLC posts. What I haven't found is a way to get similar protection of my assets without putting the properties into an LLC.

Here is my issue. I bought the two properties outside of the LLC because I didn't feel it was going to be benef

[Matthew Kreitzer]

Originally posted by @David Dachtera:

@Matthew Kreitzer

Your lender(s) can probably be most helpful if you discuss this with them (full discolsure) so they know why you're doing the transfer. They will tell you if any issues might arise.

Re: LLC: Consult an appropriate attorney (I'm not one).

That said, understand: an LLC alone only offers a single level of protection. If it's "corporate veil" can be pierced, your exposure is total.

You want to build a business entity structure such that there are multiple level of protection.

Here's a typical scenario as my investing group has learned it form our tax and legal expert:

You set up a personal or family trust. This will be part owner of an LLC you use for long-term holdings and an S-Corp or C-Corp you set up for short term holdings and cash flow. The other LLC owner is your S-Corp or C-Corp. The LLC is also part owner of your S-/C-Corp. This way, you "control everything and own nothing". All of your income-producing assets are held by a business entity and the entire structure can be willed to your heirs via the personal trust.

This triad becomes the foundation of your business entity structure and provides effective protection against liability from either the LLC or S-/C-Corp. The S-Corp also allows you to pay yourself from your business income using the "salary / dividend split" technique. This limits your income tax liability and reduces your FICA ("self employment" tax) expense.

There is a two-day (two 8-hour days, recorded) tax and legal class in the education to which I am connected. It's in the beginner's curriculum. Most people say this one class pays for their entire education in tax savings alone the first year.

David J Dachtera

"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict

      I would be careful about following this advice. Although I would stay shy of saying it would not work in your state original poster, I would say that such corporate structures may very well not be upheld by the Judges, at the very least, in my state. There are plenty of statutes in states like Virginia such as Consumer Protection and Uniform Trade (fraud) statutes that would label such a structure as a clear and obvious attempt to avoid liability. As a savvy creditor attorney, there is a significant chance I could easily circumvent such a structure. Not by virtue of the "corporate veil", but by virtue of the "badges of fraud" that it represents.

There is more than one way to skin an LLC, which is why you should always consult with a *local* attorney familiar with your state's laws for a complete analysis of what kind of corporate structure best supports your *individualized* needs.

Disclaimer: I do not agree to represent any individuals in the state of Virginia, or elsewhere for that matter, by presenting the above information. If you are viewing this post from Virginia, the Virginia State Bar may view this as legal advertising. Consult a local attorney on all matters legal. This is educational use only.