Transferring Property to LLC and What State is Best?

5 Replies

Hi BiggerPockets Community - My business partner and I are starting an LLC, and we want to transfer an existing asset property into the LLC, so the LLC can have a positive net worth and we can start the "credit rating" of the LLC on a positive note. However, we heard that in Delaware, there are no taxes for transferring property to LLCs; but we want to flip properties in PA. If we create a Delaware LLC, then I imagine we would have to still register to do business in PA and fill out "foreign entity" forms. We may also need two registered agents (one in DE and one in PA). We heard taxes are high for transferring property to an LLC in PA. Does anyone else have any experience in this? Does anyone flip properties in states that are different from their LLC state? Has anyone done this so there would be no taxes for property transfers? Thank you in advance for your help!

As I remember, there's a 1% transfer tax levied by Pennsylvania and an additional municipal transfer tax that varies by municipality. Transfers from an individual to an entity are subject to the tax, based on FMV, wherever the entity is domiciled.

Hi Phil - Thank you!

The short answer is @Steve Babiak is the best resource I know for PA related RE questions. Try 'PA transfer tax babiak' (without quotes) in the search box, or google 'PA transfer tax babiak'

@Chris Martin - the answer given by @Phil G. is accurate. The PA Dept of Revenue site is the place where the rules on transfer taxes can be found. I have posts with links to other sites that will show the additional transfer tax percentages that localities in PA will charge, so the search on BP as Chris has posted will likely identify those.

Thank you very much, @Chris Martin and @Phil Glatz and @Steve Babiak!

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