Tranfering properties from personal to Llc or s corp

Ellicott City, MD · Member since 2017 · 18 posts · 0 votes

I currently own all my properties under my name and just created an llc. I also have an s corp for my two restaurants. Can I keep using my s corp for everything or do I have to use a seperate entity? Am I able to transfer the name to my llc or s corp? What kinds of costs are there? What about the contracts I have in right now that have not settled. Can I ask them to switch it to the llc or s corp? Thanks in advance!

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Jon Pitcher

Property Manager · Oklahoma City, OK · Member since 2016 · 87 posts · 69 votes

@Samuel Lee Talk to a Maryland attorney, but based on what you have told us, the solution looks pretty simple.

1. Create a new Maryland LLC. The filing fee is only $100. http://dat.maryland.gov/businesses/documents/fees....

2. Have your attorney prepare an operating agreement (it may be called a Company Agreement in your state) for your LLC. If you are married, it is generally a good idea to make your spouse a 50/50 member with you because in some jurisdictions a multi-member LLC is treated more favorably than a single-member LLC for asset protection purposes. A corporate (or transactional) attorney will have the most experience with LLCs, but a real estate lawyer can probably draft an operating agreement too. You don't need a complex operating agreement, but it should be state specific.

3. Execute quit claim deeds to transfer your free and clear properties into your new LLC. This is extremely simple. Any attorney that can draft an operating agreement can draft a quit claim deed, and a title company could this for you as well.

4. If you have a loan in your personal name on a property, leave that property where it is. The asset protection is not worth the risk of the lender calling your loan due.

5. Leave your restaurant assets in the S-Corp and separate from your real estate. A judgment against your S-Corp won't reach your LLC assets and a judgment against your LLC assets won't reach your S-Corp assets. A judgment against you personally can still cause all kinds of problems, so make sure you are adequately insured.

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Steven Stokes
Specialist · San Francisco, CA · Member since 2013 · 227 posts · 158 votes
9y
@Natalie Kolodij OK Your opinion. Thank you.
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Steven Hamilton IIPro Member
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
9y
Originally posted by @Natalie Kolodij:

Originally posted by @Steven Stokes:
@Natalie Kolodij
When I said corp, I meant not personal. I do realize that an LLC is a hybrid corporation but that was not the point I was trying to make. The point I was trying to make is to get professional advice for his personal situation.
I did not say Steven's advice was wrong. I did say that blanket statements are not helpful. If that is too rough on accountant's egos here on BP then I don't know what to say.
I don't see anywhere that I was disrespectful to Steven. Matter of fact I did say "I enjoy and respect his contributions." Just because I do not blindly follow blanket statements from people on random real estate forums doesn't mean that I'm wrong to give the advice I gave.
This isn't an Ego game. It's a matter of there being sooooo much incorrect, slightly misconstrued, generally not the case, information that gets shared that there isn't a ton of room of mucky, un-clear advice.
Steve's blanket statement is something that's true for 95% of the time. Given that this is a web forum and not a sit down consultation someone is paying for...it's fair to assume that's sound advice for their situation.
He should absolutely get professional advice because everyone's situation is different. However when multiple long standing tax professionals are kind enough to provide their professional opinions, trying to swap someone otherwise based on the merits of your "not an expert" experience isn't helpful to the OP it just leaves them in a fog of mixed information.
Actually to add to your post the other 95% of the time is more like 0.5% of the time it belongs to Non Resident Aliens of the US.
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Steven Stokes
Specialist · San Francisco, CA · Member since 2013 · 227 posts · 158 votes
9y
@Steven Hamilton II haha the offer is real, I was raised in Michigan. So I know the midwest. Moved to California and never looked back. There are pros and cons to every place but it's really nice here, especially the weather.
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Steven Hamilton IIPro Member
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
9y
@Steven Stokes,
Funny enough my SO is from FL and relocating up here. I'm dead center between Chicago and Milwaukee. Lake County, IL. Gurnee Mills, Six Flags. Those are the big landmarks I use to tell people where I'm at.
And I'm sure @Natalie Kolodij is just as edgy as I am after the deadline. I haven't had a day off.
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David Dachtera
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
9y
@Samuel Lee,
As long you're re-organizing, consider this:
1. Set up a revocable trust with yourself as the beneficiary. Ask your attorney to be the trustee, or find someone other than yourself to be.
2. Set up an S-Corp with the trust as an owner (NOT YOU!)
3. Make your LLC another owner of the S-Corp. Make your trust and your S-Corp owners of the LLC (for multi-member protection).
That is, your entity structure is owned entirely by the entities within it, not by any human person. ("Control everything, own nothing"). Between that and the insurance those entities carry, that's about as protected as your personal assets can get as long as everything is maintained in accordance with the law.
4. Transfer your properties into the LLC. It helps if they're not encumbered by lender liens, but that can be remedied, if necessary.
If you need help with that, I can refer you to an accounting / law firm who can walk you through it and explain how to do it within the laws of your location.
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Joe J.
Investor · Los Angeles, CA · Member since 2017 · 95 posts · 52 votes
9y
@Steven Hamilton II, @Natalie Kolodij, @Linda Weygant
Just wanted to say thanks for your contributions on this thread and others. I have learned a lot from lurking on BP and running into your contributions! Especially on the nuances of LLC's and S-Corps. I appreciate your expertise and willingness to help.
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Chris Coleman
Rental Property Investor · Washington, DC · Member since 2015 · 429 posts · 393 votes
9y
David Dachtera Your step #3 says, "Make your LLC another owner of the S-Corp." It has always been my understanding that the S-Corp rules require all shareholders in an S-Corp to be Individuals, or a Trust. Are you referring to something different? How do you make an LLC a shareholder of your S-Corp? Can someone please explain? Or correct me if I'm wrong and please explain? Thanks
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Natalie KolodijBusiness Member
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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
9y
@Chris Coleman IRS has ruled that a single member LLC can be a member in an S corp since it's disregarded for their purposes
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Chris Coleman
Rental Property Investor · Washington, DC · Member since 2015 · 429 posts · 393 votes
9y
Natalie Kolodij Ahhhh...great! Thanks again!
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Steven Hamilton IIPro Member
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
9y
@Chris Coleman

Natalie is correct. As far as the IRS is concerned an LLC Doesn't exist until it makes an election to be taxed a certain way or has multiple members in which it is considered a partnership.
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Jay Baker
San Francisco, CA · Member since 2017 · 29 posts · 3 votes
9y
I would suggest having a separate LLC for each property. Or if you want to save on fees and overhead you could group similar properties under different LLCs. This way you minimize the amount of damage bad properties could do to good ones.
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Shawn AckermanPro Member
Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
9y
@Samuel Lee Short answer is your can put everything under one entity however I'd suggest consulting your CPA which you must have at this point, to give you a better understanding of your options and the best strategy to implore.
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Chris Purcell
Investor · Philadelphia, PA · Member since 2010 · 739 posts · 372 votes
9y
Originally posted by @Account Closed:

@Ryan Ahlgrim You can quit to claim the deed, but the lander can call the loan base on the due on sale clause.
Then what happens - do you have refi out with another lender? So just really comes down to additional points. What if you don't have enough equity and don't want to come to the table with cash?
If your lender calls the note and you keep paying it - wtf are they going to do?
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Roxanne Baisden
Property Manager · Yorba Linda, CA · Member since 2015 · 11 posts · 5 votes
9y
I'm looking for a way to buy rentals and be able to take advantage of all the benefits including writing depreciation,etc. I run into the problem that my husband and I have combined income (salaries in the corporate world) that exceeds $200,000 that disqualifies us. How can we structure deals to be able to write everything off? I know it can be done but I have not been able to find a good CPA/tax advisor/financial advisor to provide recommendations. In southern California.... my other option is forget rentals and go with a UIL policy! Thinking seriously about that!
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Linda WeygantPro Member
Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
9y
Originally posted by @Roxanne Baisden:

I'm looking for a way to buy rentals and be able to take advantage of all the benefits including writing depreciation,etc. I run into the problem that my husband and I have combined income (salaries in the corporate world) that exceeds $200,000 that disqualifies us. How can we structure deals to be able to write everything off? I know it can be done but I have not been able to find a good CPA/tax advisor/financial advisor to provide recommendations. In southern California.... my other option is forget rentals and go with a UIL policy! Thinking seriously about that!
You are confusing the ability to "write everything off" with qualifying to take rental losses. Here is how it works for somebody in your income category:
1. Complete Schedule E on your tax return. Input all of your rental income (by property) and all of your valid expenses, including depreciation and everything else you are legally permitted to deduct.
2. If you have more than one rental, do this for each rental. Then, add them all together. Some of your properties might have a net profit and some might have a net loss. All of these profits and losses are added together.
3. If the total number is positive, you've got a net profit and it is taxable. Enter this on the 1040 form and it is then included in your taxable income. You have written everything off that you possibly could and your income level did not keep you from doing so, but you do pay taxes on the net profit.
4. If the number is negative, you've got a net loss. Here is where your income level comes into play. If you have a net passive/rental loss and your income exceeds $150,000, then you are unable to write off those losses. Nothing is carried over to the 1040. However, all is not lost! You now have what is called a Passive Loss Carryforward.
5. Next year when you do your taxes again, you follow steps 1 through 4 above. You then add in your Passive Loss Carryforward for the prior year and add it all together. Your prior year loss is combined with your current year profits and you can use prior year losses to offset your current year profits.
6. In the event you are still in a net loss scenario, you keep doing this, over and over and over again, each and every year. You are paying $0 tax on your rental cash flow, so this is a good thing. The downside is that you are not able to write any losses against your other earned income.
7. When the year comes that you finally sell the house, you can take all of the accumulated losses that you have been saving up and use them all up at once, regardless of the level of your other income.
Investing in rentals at your income level is perfectly fine. Just know that you can't deduct your *losses*. You can still deduct all applicable expenses in order to get your taxable income from this endeavor as close to $0 as possible.
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