REASONS TO TRANSFER YOUR REAL ESTATE INVESTMENT AND RENTAL PROPERTIES INTO LLC

As you gain experience as a property investor, you’ll learn more about how to protect yourself from liability while also increasing the value of your property and rental income. Limited liability companies (LLCs) are popular company structures for real estate acquisition. When acquiring real estate or transferring titles, owners frequently opt to create an LLC so that the LLC, rather than the individual members, becomes the legal owner of record.

Creating a limited liability company (LLC) for your real estate investment or rental property

The following are some of the reasons why one should consider forming an LLC for real estate investment or rental property:

• Personal Liability Avoidance

This is the primary benefit of forming an LLC. You want the greatest alternative for reducing your personal responsibility if something goes wrong with your property. The protection is provided by LLCs. For instance, if someone is hurt while visiting a home you own, even though you do not live there or have any relationship with the guest, they may be able to sue you, the homeowner.

Your homeowner’s insurance policy would give coverage up to a certain monetary limit if you purchased property insurance to cover such situations. However, if the amount of damages sought by the injured party exceeds the policy maximum, your personal assets may be put at risk.

If you put the property’s deed and title in the name of an LLC, however, only the LLC (and not you) would be identified as a defendant. More crucially, if the injured party’s lawsuit is successful, only the LLC’s assets will be liable for monetary damages. As a result, you will maintain your privacy and your personal assets will not be disclosed.

• Distinction

Since an LLC is simple to form up, it makes sense to create one for each property. This protects each property from third-party liability claims. It offers the same level of asset division protection as your assets.

• Taxes

You may reap the benefits of what’s known as pass-through taxes if you form an LLC. A corporation is normally taxed on its earnings, and then you, as the owner, are taxed again when you withdraw income.

When you form an LLC, all of the company’s earnings are passed through to you, and you may claim them on your personal tax return. Instead of being taxed twice, your rental income is simply taxed once.

• Transferring Interests

Members of an LLC can pass their ownership stake to heirs by simply transferring it to them. There is no need to record a new deed or make revisions in this circumstance. This is why forming an LLC to own rental property is advantageous.

Transferring property to a limited liability company (LLC)

If you bought a rental property in your own name after forming your LLC or before forming your LLC, you must transfer the property rights to the LLC to prevent personal liability for anything that occurs to the property.

To transfer the property’s title in the state of Maryland, you need to have a licensed Maryland attorney draft a new deed, sign it, and get it recorded in your county or city. For more information and to find out if you have to pay a title transfer and recordation taxes, contact CDeeds today.

For more information on different types of Co-Ownership, contact us today by calling (410)-919-9681.

KAITLYN TAUBER, ESQ.

Ms. Tauber is the President and Managing Attorney for CDeeds LLC. With a career spanning nearly a decade, Ms. Tauber demonstrates an extensive history of working in the real estate and legal services industry. She has assisted in over 1000+ mixed transactions She is skilled in Residential & Commercial Real Property/ Real Estate/ Title Law, Financial Services Regulatory Compliance, Trust & Estate Planning, Contracts, and Business Law. To contact Kaitlyn for more information, email KTauber@cdeeds.com or call (410)-919-9681.