All Forum Posts by: Jason Marino

Hi Joshuam,

Yes, the Land Trust usually will work better than an LLC at avoiding the tax issues described, and it will generally not create a due on sale violation as it is operating under a recognized exception to due on sale clause violations.

Hi Joshuam,

There are a lot of variables to this situation, but I will try to reply generally to your question. You do not usually need to have an official sale to the LLC if you are going to be the owner of the entity that will own the property. You will make a transfer, usually having a title company or an attorney that creates the Deed. The Deed is State specific and sometimes even County specific. Transfer taxes vary from State to State, but you are accurate in noting that they can be an issue. Another issue is a possible tax reassessment if the County Assessor sees the transfer and believes that it qualifies as a 3rd party transaction. Many of these issues can be avoided using a Land Trust for the transfer, as a transfer to a revocable Trust is not normally treated as taxable.

Hi Sam,

As discussed in the post above, a Partnership and an LLC are 2 separate legal entities. However, if you would like to move forward with an LLC, you can structure the entity so that it has partnership language to address you and your partner's situation and goals. This language will address a broad variety of issues and attempt to avoid and control internal disputes. This is not something that I would recommend that you do yourself, as the Operating Agreement for the LLC will need custom language in order to accomplish the result that I described above.

Hi Nick,

Despite the variation of opinions on this in the posts above, you should have an Operating Agreement for any LLC created. As stated, this adds legitimacy to the entity and created distance between yourself and it. Without it, the entity has no formal corporate governance. Additionally, as mentioned, you need to plan for contingencies such as you passing away, you being incapacitated, or you adding a partner. Having an LLC without an Operating Agreement is just having a shell of the entity but not the entire thing.

Hi Tae,

I think that the response to your question depends on your situation. If you are closing on the property in an LLC, it would make sense to have the entity set up and operational before you go under contract. If you are considering moving the property into an LLC after you have purchased it in your own name, then you can probably wait. There is a large variation in opinions about LLCs and their ability to effectively protect investors. When properly set up and run in the right way, LLCs can and do offer investors protection and the ability to separate their business assets from personal assets. If you are risk averse, I would recommend having insurance and an LLC as a backup option.

Hi La'Terrius,

There are multiple different types of Deeds that are used in specific circumstances. A Quit Claim Deed, as the post above suggested, is often used in internal transactions. The reason for this is that a Quit Claim Deed does not normally include any warranty language and only transfers the interest that the Grantor has at the time of the transfer. The Grantor is not making the promises that go along with a Warranty Deed. As was suggested in the post above, you should use an attorney or a title company when making a transfer, as you will need to review the title chain to make sure that you are using the right type of Deed. Additionally, you will need to conform to the required format for the Deed. This format varies based on the State and sometimes the County. 

Hi Debra,

Based on your post, it seems like you created a Hub and spoke structure for your LLCs. This is what you described when you said that you have an LLC that is managed by another LLC. This is fairly common when people want anonymity. The Hub is usually based out of a State like Wyoming that offers anonymity for Managers. I am not sure that I understand the title company's issue, as you are probably personally the Manager of the managing LLC. It would simply be another level up from the LLC taking title. You may be able to explain the situation and avoid making alterations to your LLC. If the title company requires that you become the Manager of the spoke LLC, you would have to amend the Operating Agreement, and, possibly, you will have to amend the Manager of the LLC with the Secretary of State (depending on the State).

Hi Ryan,

Yes, an attorney can help guide you through the process, as the things that I mentioned in my post may or may not be applicable to your situation. Whether the issues are relevant will depend on the type of loan that you have and the location of the property.

Hi Ryan,

As mentioned in the posts above, you can use an attorney or a title company to make a property transfer. Some things that you should consider when making the property transfer from yourself to an LLC would be whether a due on sale clause violation of your mortgage will occur, and whether a transfer tax or tax reassessment of the property will occur. Additionally, your LLC should have an Operating Agreement and an EIN. This will enable you to get a bank account for the LLC and make the entity fully operational.

Hi Tori,

You should place all of the terms and conditions that you mentioned very clearly in a partnership agreement. Some of the most common forms of a partnership are creating a Joint Venture Agreement or creating a limited liability entity and adding partnership language in the Operating Agreement. Both of these options have benefits and detriments, but they will each help to avoid confusion and internal disputes or control internal disputes when they do happen.