California: Rental: LLC

[Jorge Barboza Jr.]

New Tax Plan Questions...

So, I have a LLC and was thinking of moving my rental property out of my name and into the LLC; however, I want to completely understand the benefits. I know this is the best place to start because the BP community is FULL of talented and knowledgeable individuals. I am open to any and all feedback, especially when it leads to increased deductions and thus more money for investing.

Thanks! 

[Basit Siddiqi]

@Jorge Barboza Jr.
Creating an LLC is normally created for asset protection purposes. Asset protection is very important to real estate investors. Many investors go with the LLC, umbrella insurance or both.

Holding an investment property in your personal name and transferring it into an LLC has some costs and nuances. 

1. You will likely have to pay a title company to transfer the title from you to the LLC which costs money.
2. If you have a conventional mortgage - you risk the due-on sale clause

In addition - California has a state tax return filing for LLC's.
Unless you would like to prepare the California LLC Return(Form 568) - expect to pay more to your accountant to file this return.
In addition - there is an $800 fee that must be remitted with the return. California requires the return to be filed if the LLC is organized in the state of California. So you may have to file this return even if you didn't transfer the title for 2017.

Let me know if you have any additional questions.