What all do you put in your LLC?

9 Replies

We have an established LLC in South Carolina. For tax purposes, we intend it to be disregarded entity. We will be purchasing at least two SFHs in the LLC soon. We're going to BRRRR the two houses and keep them for rentals. We will do a good bit of the work ourselves.

Up until now, we've had one SFH that we maintain and lease ourselves.

We have a number of tools and some equipment that we use to maintain and repair the current property and will be used to rehab the two new properties. Does it make any sense to put these into the LLC? Is this done with a bill of sale?

Also, does it make any sense to have the LLC manage the property that we own in our own names? I realize that we could put the property into the LLC but there is a mortgage with a due on sale clause (which is a topic with about 2 gazillion threads devoted to it).

For properties in the LLC, do you have the LLC on the lease? I would assume so sense rent should be collected into the LLC's bank account.

And yes, I have an attorney.  But I'm DIY to a fault.  I don't meet with professionals without coming with my own ideas.  I'm an engineer so I'm like that.

Thanks for your input!!

With only one or two properties it is maybe overkill, and you will get probably a lot of opposite opinions in this forum, but for long term buy and hold, I am in the camp of having one LLC per property (of enough value) and one C corp as a management company. The management company is collecting the rent under an operating agreement with your LLCs. Your C corp is used for most tax write off of expenses, medical benefit and other fringe benefits. You can also consider using it to fund a qualified retirement plan. The gain are passed through your LLCs.

If you do some flips, you can add an S corp entity for them.

Also by separating the operation from the ownership you divide the liability risks.

South Carolina LLC statutes are not very asset protection friendly, and it may be better to use a SC Limited Partership instead, however that would create limitations on the passive loss. I would suggest looking at having these SC LLCs owned by a holding WY LLC. It would give you a layer of anonymity and add outside liability protection.

For putting assets in the LLC you just do an assignment that will be your contributions to the LLC. You are not selling your tools to your LLC, you are contributing them to its capital.

On the lease, your property management company would be the landlord (unless your State requires to put the owner on the lease).

@Derek Scott you may want to contact your lender and discuss the due on sale clause directly. I've spoken with mine and and there is no due on sale clause for a rental property. Seemed to be a non issue. One of our larger banks in the US as well.

For the tools and equipment, one method is to tally up receipts, and reimburse yourself from the LLC so you have a deduction for these assets (assuming business use will be greater than 50% going forward). Then going forward use your LLC account for further business purchases.

Lastly, I advise to keep it simple with LLCs. Create one LLC for all rentals and if you expand into flipping, create another LLC (possibly convert to an S Corp).


Definitely start a conversation with your attorney and CPA.

Originally posted by @Account Closed :

@Derek Scott you may want to contact your lender and discuss the due on sale clause directly. I've spoken with mine and and there is no due on sale clause for a rental property. Seemed to be a non issue. One of our larger banks in the US as well.

For the tools and equipment, one method is to tally up receipts, and reimburse yourself from the LLC so you have a deduction for these assets (assuming business use will be greater than 50% going forward). Then going forward use your LLC account for further business purchases.

Lastly, I advise to keep it simple with LLCs. Create one LLC for all rentals and if you expand into flipping, create another LLC (possibly convert to an S Corp).


Definitely start a conversation with your attorney and CPA.

Thanks Josh. I just went back to the mortgage docs from our 2016 refi. The clause is in there, but it implies that it's possible to transfer to an LLC with permission from the lender. We have a HELOC on that property with the same bank and it definitely has the due of sale clause. My attorney has suggested that the transfer would be legal and that acceleration of the loans would not necessarily happen. I agree with him, but I'm too risk averse at the moment. The interest rate is 3.25% and I can imagine a bank calling the loan when rates go to 6%.

You can always go the land trust route. When you initialy deed your property to the land trust, you are the initial beneficiary and the Garn St Germain Act will forbid any due on sale. You can later assign the beneficiary to your LLC, as it is a private document, there would be no recording of it in any public records.

If your lender further down the road threaten to use the due on sale clause unless you can prove that you are still the beneficiary, you can always assign it back to you if needed at that time. It can be done in a minute and will only need a notary and/or your trustee signature in addition to yours.

That would give you some peace of mind.

It sounds clever to put your properties into their own llc to protect assets in the event of a civil suit judgment but more than likely the lawyer will go after your insurance not your assets . What many people never mention is Having them all spread out in individual llc can hurt you when you go to get commercial loans . If you want to get a portfolio loan on all your properties after you’ve done 4 then the bank will insist you have them under one llc which may mean paying closing on every property again and selling them to yourself !

Originally posted by @Dennis M. :

which may mean paying closing on every property again and selling them to yourself !

That is where having all your properties in land trust come handy. You can assign the beneficial interest without any cost. You don't even have any reassessment if you are still the same ultimate beneficiary on both structure.

Originally posted by @Mike S. :
Originally posted by @Dennis M.:

which may mean paying closing on every property again and selling them to yourself !

That is where having all your properties in land trust come handy. You can assign the beneficial interest without any cost. You don't even have any reassessment if you are still the same ultimate beneficiary on both structure.

 Good to know 

@Mike S. gave you good advice. I can only contribute a visual representation to help you in your quest for answers.