Putting Your House in an LLC: Property Ownership Reinvented

LLCs offer many advantages for business owners. They separate your personal assets from your business assets and offer legal protection. You can also capitalize on tax benefits and reduce how much money you give to the IRS. LLCs can contain various assets, but some business owners consider putting their property into their LLCs. This guide will explain how putting your house in an LLC is possible, along with the pros and cons.

Can You Put Your House in an LLC?

It is possible to put your house in an LLC. Although you can put a primary residence in an LLC, this strategy is more suited for rental properties

After forming an LLC and establishing a bank account for your LLC, you will have to get a warranty or quitclaim deed. You will have to take the signed deed to the city or county agency that handles real estate transactions. 

Homeowners with mortgages will have to take the extra step of contacting their lenders. The lender can mention any rules and regulations impacting the transfer. You will have to complete this step before filling out a warranty or quitclaim deed if you have a mortgage balance on your home.

Benefits of Putting Your House in an LLC

Putting a house in an LLC offers several benefits. These are some of the advantages you can expect. 

1. Limited Liability Protection

LLCs protect your personal assets from your business assets. Creditors can only go after your LLC instead of you personally if issues arise. This protection can help any business owner, but it becomes critical for real estate investors who may endure many lawsuits while building their portfolios. Lawsuits incurred by the LLC do not put your personal assets at risk.

2. Tax Benefits 

LLCs contain many tax benefits, such as pass-through taxation and the ability to deduct expenses. Pass-through taxation lets you avoid double taxation by reporting your property’s gains and losses on your personal taxes. Depreciation can minimize your tax burden, but LLCs get other deductibles as well. For instance, you may be able to write off travel costs if you use those trips to look at real estate listings or monitor your existing properties.

3. Enhanced Credibility

An LLC can make your business appealing to potential customers and business partners. It makes you look professional and can also help you obtain business credit. Business credit is important for real estate investors and business owners who want to take out larger loans with competitive rates and terms. You can access personal loans with a good FICO score, but good business credit gives you access to better choices, especially if you want to buy apartment complexes. 

How to Transfer Your House into an LLC?

Transferring your house into an LLC is a straightforward process that contains a few steps. Here’s what you have to do to make the transfer official. 

1. Notify Mortgage Lender

You have to inform your lender of the transfer if you still have a mortgage on your property. You may have to refinance the mortgage under the LLC and fulfill other requirements. Your lender will lay out the details if you reach out to them.

2. Set Up an LLC

You will have to gather the necessary paperwork, find a registered agent, and get a federal employer identification number (EIN). There are a few other steps as well, but LLC formation services can guide you through the process.

3. Obtain a Deed Transfer Form 

You can obtain a deed transfer form from your county check. This form is vital for transferring your house to your LLC. 

4. Record the Deed

Once you obtain a deed transfer form and fill it out, you have to provide your county office or registrar with the deed. They will record the real estate transaction so your house can become a part of your LLC.

How to Manage Your Property within an LLC?

After you add your property to your LLC, there are a few steps you have to take to manage the property. Here’s what you should expect.

1. Separate Business and Personal Finances

Starting an LLC allows you to separate your business and personal finances, but that perk also comes with extra paperwork. Maintaining accurate records for your LLC will protect your personal assets from business liabilities.

2. Comply with Local Regulations

Each state has different rules for property owners and LLCs. You may have to gather the necessary licenses and permits to operate your LLC. Your property must also have sufficient property management that complies with local laws. There may be extra regulations if you plan to start an Airbnb business.

3. Maintain Proper Insurance Coverage 

Insurance policies can protect your LLC from legal expenses and costs incurred for natural disasters and other events. General liability insurance is a good starting point for many LLCs, but LLC owners should assess all their risks when deciding how much coverage is enough.

Things to Consider with Putting a House in an LLC

Putting a house on an LLC is an important decision that will impact your finances. These are some things to consider when making a decision.

1. Increased Complexity and Administrative Burden

LLCs increase the amount of paperwork and nuance with owning and managing a property. It takes extra work to maintain an LLC, but the benefits can outweigh the extra commitment. 

2. Limited Liability Protection May Not Extend to Personal Guarantees

If you put your house in an LLC, the lender may request that you make a personal guarantee on the loan. Personal guarantees pierce the corporate bubble and put your personal assets in play if you cannot cover the loan. Limited liability protection can help if you get into lawsuits involving your property, but your personal assets may be at risk if you default on the loan. 

3. Difficulty in Obtaining Financing

New LLCs face an uphill battle with obtaining financing if they don’t have enough revenue to meet the requirements. While it may be difficult to get financing in the beginning, you can build business credit over time. Your LLC activity will not affect your personal credit score, so you can get loans with a good FICO score. 

Getting Your Home in an LLC

An LLC separates your personal assets from your business assets. This distinction can protect you from personal liability and also lower your tax bill. Getting your home in an LLC can be complicated, but doola is here to help. You can use doola’s LLC formation services to speed through the process. Business owners can start, grow, and manage their LLCs from one place.

FAQs

Do I need an attorney to put my house in an LLC?

No, you do not need an attorney to put your house in an LLC, but it is very helpful to have one.

Can I put a mortgaged house in an LLC?

Yes, you can put a mortgaged house in an LLC.

Will transferring my house to an LLC affect my property taxes?

Transferring your house to an LLC will not affect your property taxes. Property taxes are based on a percentage of your home’s value.

Can I live in a house owned by an LLC?

Yes, you can live in a house owned by an LLC.

Can I rent out my house if it’s in an LLC?

Yes, you can rent out your house if it is in an LLC.

doola's website is for general information purposes only and doesn't provide official law or tax advice. For tax or legal advice we are happy to connect you to a professional in our network! Please see our terms and privacy policy. Thank you and please don't hesitate to reach out with any questions.

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