Rentals without an LLC

[Caimon Bistis]

Hello all,

I recently bought a duplex without an LLC. After the purchase I opened an LLC with 1 other member additionally I opened a business account with that LLC. We used my other members credit card to finance the repairs and was then reimbursed by the bank (construction loan). We now have all the rent and management fees being taken from the business account. I never signed the property over to my LLC it's still under me and only me. How is this going to workout come tax season? Will I be able to take advantage for the repairs? Will I have to report anything to the IRS from the LLC since technically nothing is under it? Will my partner be able to take advantage of anything since nothing is in there name we just used their card..?

[James Ohliger]

I'd recommend talking to a CPA to address your situation. (*Disclaimer* I'm not a CPA. Take all of this advice with a grain of salt). From what I can tell, you opened an LLC but you're not getting any of the protection that an LLC offers since you still own the property under your name. If you don't have plans to move the property under the LLC, there wasn't really a need to create one in the first place. You should still be able to claim all the related tax deductions, but it will all have to be done under your name. And unless your partner has some official ownership of the property or you move the property to the LLC that they are a member of, they are probably going to be out of luck come tax season. But I would say the situation you're in now (you own the property but the LLC is taking income and paying expenses) is very messy and is not offering the protection you may think it is. You're going to want to move everything to the LLC or move everything back to your personal accounts.

Another thing to be aware of is that if you do a quit claim deed to your LLC, technically your lender can call the loan due, since your loan contract stipulates the property is in your name. This is a risk that anyone takes when taking out a residential loan and then quit claim deed to an LLC. Whether anything happens or not is up to each individual bank and if they find out, which they probably would if they're escrowing your property taxes for you. So just something to be aware of. Certainly a lot of people have done this. But it's cleanest/safest to have a commercial loan underwritten for the LLC specifically.