I would like to transfer some properties in one LLC to another. A Title company told me I can transfer properties from one LLC to another by paying a 3% transfer fee + document preparation fees. Option #2 which is less expensive is to transfer from LLC to personal name then transfer to 2nd LLC and this will avoid the 3% transfer fee. Has anyone done option 2 before? Saving money would be great, bit I didn't know if this would increase my liability moving into my personal name for a short period of time? Would love your feedback, thanks!
Best bet it to talk to an attorney. There are a few options. Quick and dirty, if you own both LLCs, is to simply draft up a quitclaim deed and file it with the clerk of courts. You'll owe transfer taxes and future buyers may question the quitclaim. Another option is to merge the LLC, or have one become a parent to the other. Not sure if those would fit your goals though.
@Brent Tice , 3% of what? The value of the asset?
If you quit claim for Option #2, it'll take a few couples to properly clear with the Recorders office. If you're worried about something happening in that short period, pay the fee. If you're comfortable taking that risk, do Option #2.
Also, I would clarify with your mortgage company. You might not be able to transfer to another LLC or yourself without pre-payment penalties. You can ignore and take that risk if you wish to still transfer.
Yes I think it is 3% or market value. I am trying to spread out risk by moving some properties. I did contact the bank as well about this. Thanks for your feedback.
Sean looking for some clarity, what do you mean by merging the LLC? Also why would you set one up to be a parent of the other,I haven't heard of that? Thanks!
@Brent Tice , I noticed in the comments above some suggestions of merging and creating parent/child structures. Here is a link that can help you get a better understanding of a merge. As far as creating parent/child structures, one way requires incorporation as a series LLC. That is done in States that support series LLC like Texas, but not Wisconsin. From my understanding Delaware was the first state to enact legislation authorizing the creation of series LLCs. Several states have followed suit including Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, Utah and Puerto Rico.
You can create the parent subsidiary relationship with traditional LLCs in the other states (It is just easier with series LLCs!). Check out this link.
Hope this helps!