Shall I deed my STR to my LLC for liability protection?

Question

Hi BP Family

I'm currently running STR in Durham and the property deed is under my own. Shall I change deed to my LLC for better liability protection? I'm currently using my LLC running my STR business. Thanks for appreciate any advice.

Mike Grudzien · Answer

Get an umbrella insurance policy ($1mm-$2mm).Unless all your actions and executions are flawless, for years: LLCs get pierced all the time by savvy attorneys...

John Underwood · Answer

NO!

Unless your mortgage is paid off because bank could call the entire balance due.

Also LLC'S can provide a false sense of security unless you are doing all the proper steps to keep your LLC. Most decent attorneys can easily pierce the LLC.

Better steps are to make sure you have the correct STR insurance and then you can always add an umbrella insurance policy if you want additional protection.

Make sure you properly maintain your properties to minimize chances of being sued.

Bruce Woodruff · Answer

Mike is right. LLC's offer very little protection or tax advantage when you get right down to it. Just get a ton of insurance....

Michael Baum · Answer

Again, I agree with my buds here.

An LLC provides no liability protect, well almost none. It is only good against contract disputes.

If you have a liability claim, someone is injured etc, an LLC will not be any help.

Make sure you have rock solid insurance for STRs and plenty of it.

An umbrella is an excellent idea as well.

Collin Hays · Answer

nope. This question gets asked about once a month.

J Castro · Answer

Hey @Susan Hsiao welcome to BP!

It sounds like you're considering transferring your STR property to an LLC primarily for liability protection, which is a common and often advantageous strategy for real estate investors.Deeding your STR property to your LLC can provide significant liability protection by separating your personal assets from business risks. However, the decision requires careful consideration of both the pros and cons, including potential mortgage complications, additional costs, and the need for strict adherence to corporate formalities. It is highly recommended to consult with a legal and tax professional before proceeding.Pros of deeding your STR to an LLC

- Liability protection     - Asset Protection     - Separation of Finances     - Tax Flexibility     - Enhanced Credibility     - Privacy and anonymity     - Easier ownership transfer     - Simplified estate planningCons of deeding your STR to an LLC

- "Due-on-sale" clause     - Increased costs and administration     - Potential tax consequences     - Need for separate finances     - Loss of homestead exemption

Given the complexities involved, especially with potential lender issues ("Due-on-sale" clause), tax consequences, and the necessity of maintaining corporate formalities, it's highly advisable to consult with an attorney and a tax professional before making the transfer. They can help you evaluate your specific situation and determine if transferring the STR to an LLC aligns with your financial goals and risk tolerance.

Ashish Acharya · Answer

@Susan HsiaoPutting your short-term rental (STR) deed into your LLC can improve liability protection by aligning ownership and operations, but it comes with trade-offs. In North Carolina, lenders may have “due on sale” clauses allowing them to call your loan due if you transfer the title without approval. Check for possible transfer taxes, title insurance updates, or insurance changes. There’s no change in income tax treatment, as you’ll still report income and expenses the same way. Avoid creating a spousal LLC unless advised by your attorney or CPA, since it can require a separate partnership return. Many STR owners keep the property in their name, run income and contracts through the LLC, and use umbrella insurance for simpler protection. If you decide to transfer the deed, consult a real estate attorney and CPA to ensure it’s done properly without triggering legal or lending issues.This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

Andrew Steffens · Answer

Echoing mostly with what is above - but LLC's are pretty decent are shielding from contract disputes but offer little protection from liability which is likely the motivation behind putting an STR in a LLC.  You're best of getting an umbrella insurance policy.

Benjamin Louie · Answer

@Susan Hsiao Hi Susan, many investors face the same question. Deeding the property to your LLC can offer liability protection, but it may also trigger due-on-sale clauses, higher taxes, or insurance changes. Many people instead keep the deed in their name and use a strong insurance policy + umbrella coverage, while running operations through the LLC. Best move is to check with a real estate attorney in NC so you’re protected both legally and financially.

Stuart Udis · Answer

The LLC you currently have operating your business offers zero protection. If you have one STR, you are likely just accumulating additional expenses. An LLC is helpful for keeping your name out of the docket and for business planning above all else. While there are asset protection benefits, those benefits are most readily available to those who operate their business correctly and avoid disputes and controversy. Also, most plaintiff's attorneys do not want to pierce LLC's. They either want to present their claims in a manner that triggers insurance coverage or obtain a monetary judgement against the entity that owns real estate. Those are the path of least resistance when it comes to getting their clients paid and collecting their fees. Therefore, pay your bills, keep up with licenses and permits so you are operating your business legally, avoid acting negligently, premises liability pitfalls, and associate with vendors who are licensed, insured and list yourself/deed holder entity as additional insured. That's the winning recipe.

Shall I deed my STR to my LLC for liability protection?

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