All Forum Posts by: Janet R.

@Seth Mosley If it were me, I would transfer all of those properties through quit claim or warranty deed to an LLC. LLC's are not expensive to maintain once you have it setup, a corporation will have more costs and administration, but not an LLC. I wouldn't try that with a corporation though because you would actually have to sell the propeties to the corp and the lender can call the note; whereas LLC is just a deed transfer.

I currently have a few LLC's and an S Corp...Corp is always more cumbersome and expensive. If I were in your position, I would be concerned if a suit came along knowing that I personally have these assets; you have more to lose. Although I'm not an attorney I am in agreement with Tim Priebe through my own experiences both professionally and personally. @Tim Priebe (Tim your name is so familiar...do we know each other) 

You should be fine transferring to an LLC, the only reason a lender might call the note is if you want to transfer to a Corporation. Transferring to an LLC is just a Quit Claim or Warranty Deed; the promissory note is still in your personal name (or however you financed). Where you have more of a concern regarding due on sale is if you transfer to a Corporation. In order to transfer to a Corporation you have to actually sell it to the entity, this is why a lender would call the note if they found out you sold it. They of course, and rightfully so, expect their payoff.

 Wonderful! Would love to connect if you are in town.  Have a great weekend!

@Brie Schmidt One item to note, I sort of touched on in my earlier post where I mentioned the distribution and contribution on property but thought I should outline a bit more...

Because you have financed properties (if I understood correctly) you want to be very careful about moving those under the corporation. Reason being...with an LLC you can quit claim or warranty deed a property from personal to LLC after financed with Freddie/Fannie. However, if you want to put the financed properties under a Corp you actually have to sell to the corp the property. If ever the mortgage company wants to perform an audit they can call the note. Essentially by selling the property to the corp the note should have been paid off. So the mortgage company will be looking for their payoff. If it's in an LLC you didn't have to sell the property to get it there so it's no issue.

@Brie Schmidt On the surface they are similar in many ways but there are restrictions in connection with S Corps and they also generally require more administration, (annual minutes on file etc.). I would also evaluate the tax implications you might have over each entity structure as well. Your attorney or CPA should be able to guide you best since they would be familiar with your current business structure. This is my 2 cents on LLC (multi-member) vs. S Corp as entities, however not specific to any one individual or business, just in their generic form...

• Both generally protect members and shareholders from personal liability for the debts and obligations of a business. However a single member LLC may not protect the owner from creditors.
• For tax purposes an LLC can file as an S Corp (file S election w/IRS first)
• No upper limits on the number of LLC members, S Corps up to 100
• No restrictions on LLC ownership interests (flexible), an S Corp can have only 1 class of stock but can have differences in voting rights
• Special allocations in income, gain, or loss in an LLC is permitted but not in an S Corp they allow pro rata allocations because of the stock
• In regards to distribution and contribution of property (not cash) an LLC may have tax advantages over the S Corp. The LLC usually doesn't recognize a gain or loss until the member disposes of the distributed property. With an S Corp, distributions of appreciated property are treated as a sale by the corp causing pro rata recognition at the shareholder level.
• It's easier to pass through tax losses to LLC members than to S Corp shareholders because of favorable rules relating to the tax bases of LLC ownership interests.

This isn't an all-inclusive list but wanted to show you some of the differences. Hope this helps :-)

Congrats on your Rental!!

I would agree with other's suggesting that you finance vs. all in with cash. Money is cheap right now...why not borrow someone else's cash? I think it is dependent upon your investment strategies, however I personally would not use "all" of my cash for a property unless it was a tax lien (and that's still a maybe). If it was my rental, I might want some of that cash for reserves on the property.